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0 pointsmac010215y ago0 comments

I don't have a super-well formed opinion about this but I think a wealth tax has some issues that don't get enough attention.

Like that the market value of an asset can fluctuate wildly and become untethered from the actual rational value of the asset.

So imagine you're Bezos or Musk and you're not trying to be super rich per se but just trying to build a company according to your vision and so you have a bunch of equity in the company (so that you can control it) but no matter how loudly you proclaim that the market is overvaluing your stock the price keeps going up and now you have to sell lots of shares in order to pay the wealth tax assessed against your equity and you don't have a controlling vote anymore and your vision for your company just dies.

And maybe the hordes of people who think no single person should have a controlling share of a billion-dollar company are right - I don't know. But I'm pretty sure a large fraction of people who build companies (like Bezos or Musk) are doing it to build an enterprise, and not for the cash. Otherwise they'd just stop and have fun with their private jets at a certain point. So if a wealth tax were not going to let them keep control of their enterprise beyond the first decade, they probably would opt not to waste their time building it at all.

And maybe that's fine, but I'm not sure what society looks like in a world where people don't want to build companies.

0 comments

nine_k5y ago

There is a ton of examples of societies where people don't want to build enterprises. Medieval Europe, where guild and social strata regulations prevented any large enterprise, except maybe large merchant operations. Sime of the poorer modern-day African countries, where social norms prescribe that any fortune has to be divided with the extended family, so concentration of assets to keep building something large is hard.

I frankly think that the American model of free enterprise with reasonably few restrictions made most to improve the well-being of its population.

gonehome5y ago

I think a wealth tax is a bad idea (as described in my comment above), but you can structure equity so that you retain control even without a large holding of shares (see: Palantir, Facebook).

Arguably a wealth tax would create an incentive for everyone to do this which I would argue is probably bad since then the company controllers have less skin in the game.

Generally I think a wealth tax creates a ton of these perverse incentives with little true upside.

mac01021OP5y ago

> you can structure equity so that you retain control even without a large holding of shares (see: Palantir, Facebook).

I'm a little confused about this though. If class A shares have all the votes (while most shares are class B shares), what prevents the market from valuing the class A shares at an extremely high value and the class B shares not at all? When the company finally gets big and stops growing, the source of its value to shareholders will be the dividends that it pays and it will be the voting class A shareholders that decide how dividends are allocated.

gonehome5y ago

There’s typically a rule that the shares with extra voting power cannot be sold. They automatically convert prior to sale.

Basically they’ve thought of these things and controlled for them already.

j / k navigate · click thread line to collapse

0 pointsmac010215y ago0 comments

I don't have a super-well formed opinion about this but I think a wealth tax has some issues that don't get enough attention.

Like that the market value of an asset can fluctuate wildly and become untethered from the actual rational value of the asset.

And maybe that's fine, but I'm not sure what society looks like in a world where people don't want to build companies.

0 comments

nine_k5y ago

I frankly think that the American model of free enterprise with reasonably few restrictions made most to improve the well-being of its population.

gonehome5y ago

I think a wealth tax is a bad idea (as described in my comment above), but you can structure equity so that you retain control even without a large holding of shares (see: Palantir, Facebook).

Arguably a wealth tax would create an incentive for everyone to do this which I would argue is probably bad since then the company controllers have less skin in the game.

Generally I think a wealth tax creates a ton of these perverse incentives with little true upside.

mac01021OP5y ago

> you can structure equity so that you retain control even without a large holding of shares (see: Palantir, Facebook).

gonehome5y ago

There’s typically a rule that the shares with extra voting power cannot be sold. They automatically convert prior to sale.

Basically they’ve thought of these things and controlled for them already.

j / k navigate · click thread line to collapse