1 year ago 🥁 for day 161, 2021 with 321 words.

Taxing Equity

Exercise: None really
Piano Song of the day: Vivaldi Spring (80% speed)

Karen suffered through a piano recital of Vivaldi today,. we're still married so it couldn't have been that bad.

Following up on yesterday's article about tax, how would it work if rich people were actually taxed on their "paper worth".

Again, let's say we take Elon Musk: Net Worth (on paper): $13.98B. So assuming the maximum Federal tax rate of 37%, he would need to pay taxes of $5.2B.

Where does he get the $5.2B from? Well, his main asset is stock in his own companies. So he has to sell shares. And pay tax on that. So assuming a capital gains tax rate of 20% (he has held the stock for more than 1 year), he would need to sell $6.5B of stock. To pay the taxes on the stock sale, plus the income tax on his assets. End result he wealth is cut in half.

But, can you imagine what happens if $6.5B of Telsa / SpaceX stock is solve. You got it, the stock value would go down a lot. It would be hard to offload that stock and [a] realize $6.5B in cash and also the stock value would fall - significantly. All those individual investors would suffer, but more importantly all those people who have their retirement funds in 401(k)'s and IRA's would also suffer.

OK, so 37% (top income tax rate is too high), so lets tax rich people 1% of their asset value. That would still raise $1.4B (or actually $1.7B in income + capital gains tax), and Elon Musk would still be rich. The stock might fall a little, but not so much.

$1.7B seems like a lot of money, but for a county the size of the USA, it's nothing. Sadly.

Plus, as @rinrae pointed out, there are much more important issues than taxing people's wealth, much more.

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By Yorick Phoenix 🥁

Chief WriteTogether Bug Finder & character stringer. Generally, to create computer code, but sometimes actual words and paragraphs. Listens to lots of music, takes lots of photos, & invests in stocks for the long haul.

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