I think we need to mentally compartmentalize Elon Musk, the rich dingbat, from the output of his companies.
Tesla single-handedly brought the electric car to the American market in a sustainable way, where every US and Japanese car maker was in a pause state waiting for somebody else to take the first move (although, credit to Nissan for the Leaf, but I think that by itself the Leaf wasn’t going to open the floodgates).
For all the goofiness around SpaceX, I think they’ve proven that they are the right model for developing orbital boost systems. Other major players are trying to be more like SpaceX.
Should the US have effectively subsidized these efforts? Yeah, we should have. Arguably Tesla and SpaceX were the only serious players in these markets with the chutzpah to be successful, after a lot of false starts by others (incl. bigger companies in the same markets).
It’s a shame that they enabled and enriched a giant dingbat, but in the end, Tesla and SpaceX have done things that nobody else could.
So by all means, tax him. And point out how Tesla and SpaceX depended on gov’t subsidies and tax rebates. But let’s also keep focus on the fact that electric car success and a more competitive space program are good things that were, and are, worth taxpayer involvement.
Also, to go back to the subject of the article. We don’t really need a wealth tax. We don’t need a corporate tax (which is just the political cowards tax).
We need to stop giving capital gains a free ride. Tax income when it is realized, consistently. Investment income should the same tax – or just very slightly less – as wage income. 15% tax on investment returns is laughably low.
And those unrealized gains, saved for a rainy day in an art safe in switzerland, or in some special financial scheme that effectively hides/reinvests any profits without triggering the tax obligation?
There is something to an extremely low-percentage wealth tax that kicks in only at an insane amount of wealth. It could introduce the obligation to track and report individual wealth in a standard way, at the risk of a significant financial penalty, helping to bring much needed transparency, which in turn can help shape future laws and policy.
That wealth is just paper until somebody spends it to buy something… capital goods, or services, or political influence, or whatever. Let people sit on their paper fortunes, but tax it consistently whenever it’s used to buy stuff, or collateralize a loan, or whatever that allows people to realize value.
I wouldn’t necessarily oppose a wealth tax, I just don’t think it solves the problem. The problem we need to solve is passive income being taxed far less than wage income, and then we need to tax both kinds of income at rates that make sense.
n some special financial scheme that effectively hides/reinvests any profits without triggering the tax obligation
If that happens, then the system is fundamentally broken. If cross-border complications allow for hiding of passive income, then they are effectively hiding the wealth itself.
the obligation to track and report individual wealth in a standard way
I just don’t think that’s possible. The US can’t force reporting requirements on “art” in Switzerland or Botswana. And wealth is difficult to measure anyway – if the wealth is invested in art in a safe in Switzerland, how do you even value it? How can you possibly know what the next person is willing to spend for that art?
Instead, wait for the owner to sell it, and THEN tax the sale. It’s very hard to measure and capture “wealth”; it’s relatively easy to capture transactions.
Estimate it. As I clearly said, it is mostly about increasing transparency, for a greater understanding and better policy tomorrow. Turn those that hide their wealth from the tax authorities into criminals, while making compliance easy and cheap/mostly free.
Some countries now require you to pay a yearly future-tax-contribution on financial investments, which is then corrected at time of sale (eg. potential for a tax refund after selling a stock after it had a very bad year). Good or bad, I don’t know.
Sure, their accountants will have a little more paperwork, on top of their current workload. There is a cost to that. But if the total is well under the wealth tax threshold, there’s no tax and little risk of an audit that re-evaluates it’s worth. And if they are above it, then a small % of the excess will incur a tax.
If it is ever discovered that they failed to declare wealth (owned or controlled), THAT is when a penalty tax comes in, and they might find themselves obliged to pay $2mil in the US for that painting in Switzerland.
There is of course much more complexity to implementing this well. International treaties would need to be changed, to align reporting requirements and to limit loopholes that enable foreigners to avoid reporting and tax obligations (eg. an automatic wealth tax on foreign held assets in the absence of a tax treaty). There’s cost there too.
This kind of thing gets discussed occasionally, but so far hasn’t gained traction. Realistically, I don’t expect it to.
This is what bothers me. We say it’s impossible to do for the wealthy like this. Yet we regular folks get taxed like this every year. Property taxes. We have to pay for the illiquid shit we own, but it’s impossible for the wealthy?
Is the US government (or any national government) going to evaluate the value of paintings or baseball memorabilia or the portfolio of song rights for the The Turtles?
My sense is that it’s easier to establish value for things – and make a case for taxes – when they are sold in a market or used as a financial instrument (e.g. to collateralize a loan).
That’s a non argument. The VAST majority of wealth we are talking about is in equities which absolutely have a clear price. All that other stuff is noise to confuse the point. You really think the wealthy will put all their money in art that has no intrinsic value? And wait a sec, even if they did, what did they just pay for it? That seems like a perfectly valid basis for tax.
None of these values are ever perfect. The point is, we pay a small percentage of our assets every year, but the wealthy have convinced us they couldn’t possibly. Most don’t even “own” anything, it’s all under tax and liability protected companies.
I think we need to mentally compartmentalize Elon Musk, the rich dingbat, from the output of his companies.
Tesla single-handedly brought the electric car to the American market in a sustainable way, where every US and Japanese car maker was in a pause state waiting for somebody else to take the first move (although, credit to Nissan for the Leaf, but I think that by itself the Leaf wasn’t going to open the floodgates).
For all the goofiness around SpaceX, I think they’ve proven that they are the right model for developing orbital boost systems. Other major players are trying to be more like SpaceX.
Should the US have effectively subsidized these efforts? Yeah, we should have. Arguably Tesla and SpaceX were the only serious players in these markets with the chutzpah to be successful, after a lot of false starts by others (incl. bigger companies in the same markets).
It’s a shame that they enabled and enriched a giant dingbat, but in the end, Tesla and SpaceX have done things that nobody else could.
So by all means, tax him. And point out how Tesla and SpaceX depended on gov’t subsidies and tax rebates. But let’s also keep focus on the fact that electric car success and a more competitive space program are good things that were, and are, worth taxpayer involvement.
Also, to go back to the subject of the article. We don’t really need a wealth tax. We don’t need a corporate tax (which is just the political cowards tax).
We need to stop giving capital gains a free ride. Tax income when it is realized, consistently. Investment income should the same tax – or just very slightly less – as wage income. 15% tax on investment returns is laughably low.
And those unrealized gains, saved for a rainy day in an art safe in switzerland, or in some special financial scheme that effectively hides/reinvests any profits without triggering the tax obligation?
There is something to an extremely low-percentage wealth tax that kicks in only at an insane amount of wealth. It could introduce the obligation to track and report individual wealth in a standard way, at the risk of a significant financial penalty, helping to bring much needed transparency, which in turn can help shape future laws and policy.
That wealth is just paper until somebody spends it to buy something… capital goods, or services, or political influence, or whatever. Let people sit on their paper fortunes, but tax it consistently whenever it’s used to buy stuff, or collateralize a loan, or whatever that allows people to realize value.
I wouldn’t necessarily oppose a wealth tax, I just don’t think it solves the problem. The problem we need to solve is passive income being taxed far less than wage income, and then we need to tax both kinds of income at rates that make sense.
If that happens, then the system is fundamentally broken. If cross-border complications allow for hiding of passive income, then they are effectively hiding the wealth itself.
I just don’t think that’s possible. The US can’t force reporting requirements on “art” in Switzerland or Botswana. And wealth is difficult to measure anyway – if the wealth is invested in art in a safe in Switzerland, how do you even value it? How can you possibly know what the next person is willing to spend for that art?
Instead, wait for the owner to sell it, and THEN tax the sale. It’s very hard to measure and capture “wealth”; it’s relatively easy to capture transactions.
Estimate it. As I clearly said, it is mostly about increasing transparency, for a greater understanding and better policy tomorrow. Turn those that hide their wealth from the tax authorities into criminals, while making compliance easy and cheap/mostly free.
Some countries now require you to pay a yearly future-tax-contribution on financial investments, which is then corrected at time of sale (eg. potential for a tax refund after selling a stock after it had a very bad year). Good or bad, I don’t know.
I’m not sure that’s how taxes work, though.
Sure, their accountants will have a little more paperwork, on top of their current workload. There is a cost to that. But if the total is well under the wealth tax threshold, there’s no tax and little risk of an audit that re-evaluates it’s worth. And if they are above it, then a small % of the excess will incur a tax.
If it is ever discovered that they failed to declare wealth (owned or controlled), THAT is when a penalty tax comes in, and they might find themselves obliged to pay $2mil in the US for that painting in Switzerland.
There is of course much more complexity to implementing this well. International treaties would need to be changed, to align reporting requirements and to limit loopholes that enable foreigners to avoid reporting and tax obligations (eg. an automatic wealth tax on foreign held assets in the absence of a tax treaty). There’s cost there too.
This kind of thing gets discussed occasionally, but so far hasn’t gained traction. Realistically, I don’t expect it to.
This is what bothers me. We say it’s impossible to do for the wealthy like this. Yet we regular folks get taxed like this every year. Property taxes. We have to pay for the illiquid shit we own, but it’s impossible for the wealthy?
Is the US government (or any national government) going to evaluate the value of paintings or baseball memorabilia or the portfolio of song rights for the The Turtles?
My sense is that it’s easier to establish value for things – and make a case for taxes – when they are sold in a market or used as a financial instrument (e.g. to collateralize a loan).
That’s a non argument. The VAST majority of wealth we are talking about is in equities which absolutely have a clear price. All that other stuff is noise to confuse the point. You really think the wealthy will put all their money in art that has no intrinsic value? And wait a sec, even if they did, what did they just pay for it? That seems like a perfectly valid basis for tax.
None of these values are ever perfect. The point is, we pay a small percentage of our assets every year, but the wealthy have convinced us they couldn’t possibly. Most don’t even “own” anything, it’s all under tax and liability protected companies.