Even when they do still control the company over the long run, assuming it becomes a public company, they will be selling stock on a regular basis to cover regular expenses.
IIRC Bezos sells over $1B in Amazon stock per year to fund other things, but there is no outcry about how un-american it is that he has to "sell off his stake in his own company" to pay for his hobbies/lifestyle.
> IIRC Bezos sells over $1B in Amazon stock per year to fund other things, but there is no outcry about how un-american it is that he has to "sell off his stake in his own company" to pay for his hobbies/lifestyle.
Sure, but that's voluntary. It's fine for me to sell my house if I have other plans. It's less fine for me to be forced to sell my own house even if I want to continue to own it / live in it.
Property tax is really funny in the context of this conversation. You are paying a percentage of the _value of the house_, which you (have most likely) taken a loan to pay for.
A given average person in the US (excluding high earners) will likely be paying a property tax rate based on a value that is _actually higher than their net worth_, which makes property-tax-as-a-wealth-tax for average American homeowners actually greater than the 1.69% average property tax rate.
Imagine if this was applied as a "wealth tax" on a brokerage account, but considered that you could borrow 5x your balance on margin, and then were taxed on your margin holdings.
The scale of property value and wealth value isn't remotely comparable. For the most part, property values are pretty low, and hence the tax that you might pay on property is also fairly low. The US State with the highest property tax is New Jersey (2.47%), and the median home value is about $330,000. The annual tax on the median home there is around $8,100 — definitely steep, but still well within reach for most families, especially those that are fortunate enough to own homes.
In contrast, if you were to take an individual worth $10 billion, whose entire net worth is derived from the ownership of their stock, and were to tax them 2% of their wealth annually, they would have to somehow come up with $200 million every year to pay the tax. This is a different proposition altogether, since none of these billionaires have that much money sitting around in cash (or any other asset for that matter). They're just wealthy on paper. The only way to pay that tax would be to either liquidate their holdings, or for their corporations to pay enough in dividends to cover the tax, which is an odd (IMO bad) incentive to create for corporations in general. Even the owner of a $300 million business who owns (say) 30% of their company at a $100 million net worth would have to come up with $2 million in cash every year. Very few CEOs have that kind of cash coming in on a yearly basis, and you're essentially just creating an incentive for corporations to inflate the compensation to their founder CEOs just so that they can maintain ownership in their own company.
A big reason for this disparity between the top 1% value of corporation vs the top 1% value of property is that, unlike land (which is fixed), corporate wealth is NOT zero-sum, it's created. This is a very important distinction, because a lot of the rhetoric around wealth is sometimes based around the idea that there's some fixed amount of wealth in the world, and the rich have just been stealing all of it — no the aggregate wealth has been created at historic levels.
Also Federal property taxes are unconstitutional, which is why it's applied entirely at the state / local level.
>In contrast, if you were to take an individual worth $10 billion, whose entire net worth is derived from the ownership of their stock, and were to tax them 2% of their wealth annually, they would have to somehow come up with $200 million every year to pay the tax
If your $10 billion dollar asset isn't returning you much more than 2% per year, it has a terrible ROI, and you need to divest.
>corporate wealth is NOT zero-sum, it's created.
Not absolutely, but the power represented by the percentage of the world's wealth one controls is finite. At the limit if I own 99% of a countries current wealth, I think it's perfectly reasonable for the rest of the citizens of that country to decide that I have amassed too much power and to rectify that by taxation and redistribution.
For most people they start a company to make money, so ultimately it's about the ROI. They think they'll make more by controlling the company than the alternative
When we are talking mutli billionaires like Bezos who may be driven by more grandiose incentives like amassing power, I think it's perfectly reasonable for the rest of us to effectively remove some of their control.
Even the most aggressive wealth tax that is proposed is for a tax on wealth of over $50 million. So the founder of businesses valued up to around $100 million dollars would reasonably be able to maintain control without paying any wealth tax.
So I'm perfectly OK saying you can't single-handedly control a business larger than $100 million without paying the rest of society extra compensation for maintaining that kind of power.
Seems perfectly fair to me. Power is finite in the same way land is. If controlling a company is valuable to you in some other way other than just amassing power, say you are really behind the mission of going to space, you can reorganize into a non profit.
People with $50M won't be selling their primary houses to cover a wealth tax. If they're selling their vacant 3rd vacation homes, then that's all part of the idea to gradually reduce the amount of assets that the extremely wealthy are able to hold. The idea is that wealth concentration actually reduces competition.
Of course it's a slippery slope, but most things in life could be categorized that way.
I think there's a fundamental misunderstanding of where this wealth is sitting. For most of the super-rich, the wealth isn't sitting in diverse assets that can simply be liquidated (Elon Musk doesn't have a 3rd home).
If you were to impose a wealth tax on Elon Musk, he would have to gradually give up his ownership in SpaceX and Tesla.
> The idea is that wealth concentration actually reduces competition.
But that's just not been the case. Wealth is not zero-sum. Just because Bezos is a 100 billionaire on paper, doesn't mean that I can't go and raise venture capital for my startup and succeed.
> he would have to gradually give up his ownership in SpaceX and Tesla.
That's sort of the point. Unless he's creating additional value as a CEO such that the board keeps awarding him stock or money so he can maintain his holdings, he's going to lose his ownership stake. Sounds like a tax like this would motivate him to work more not less.
> Sounds like a tax like this would motivate him to work more not less.
You frame this as though this is somehow beneficial to shareholders, but if that's the case, they can work out this arrangement themselves.
Also the idea that SpaceX or Tesla would continue to be valued as highly as they are if he continuously relinquishes his ownership stake is also dubious.
> You frame this as though this is somehow beneficial to shareholders, but if that's the case, they can work out this arrangement themselves.
I was showing how a wealth tax need not necessarily discourage endeavor and industry, as is commonly alleged.
> Also the idea that SpaceX or Tesla would continue to be valued as highly as they are if he continuously relinquishes his ownership stake is also dubious.
Why? I thought they were valued highly because of Musk's leadership, not ownership. Is that not the case? Even without his ownership stake, he can continue to be the CEO as long as the companies do well.
> I thought they were valued highly because of Musk's leadership, not ownership. Is that not the case? Even without his ownership stake, he can continue to be the CEO as long as the companies do well.
That's not how publicly traded companies work. If a sufficiently motivated activist investor accumulates a large enough ownership, they can decide to fire Elon Musk — and there are enough people that would like to see this happen on account of his crazy tweets.
That's the crux of the argument, that no matter how badly activists may want to remove Elon Musk as CEO, he's safe as long as he maintains his stake. A forced divestiture of that threatens his ability to maintain his leadership in those companies, and that's arguably not in the best interests of many existing shareholders today.
Again, at the risk of explaining the basics of how publicly traded companies work...activist investors may disagree with other shareholders as to whether “Musk is a value add”. It’s not some objective truth, it entirely depends on what the majority shareholder thinks. Today, that happens to be Musk himself. Under a wealth tax, that’s no longer true.
I'm aware of how publicly traded companies work. Activist investors don't take a majority stake, just one large enough to get a board seat or two (5% is considered the minimum in the US) and make some noise. Shareholders vote on whether to add newly-nominated board members, so if they think an activist investor intending to fire the CEO is not acting in their interest, they can vote against adding said investor to the board.
If an "activist" investor actually bought 51% of the company (aka an "acquisition" or "takeover"), they would also own 51% of the downside of any CEO changes. At that point they have every right to decide what's in the company's interest. The company's shareholders can also vote on whether to accept the acquisition offer, which means dissenters who lose the vote can sell and get out if they disagree with the new owner's direction.
For that matter, Elon Musk only owns 21% of Tesla right now[1], so if 51% of the board think he's a net-negative, he could go immediately. They clearly do not.
> Activist investors don't take a majority stake, just one large enough to get a board seat or two (5% is considered the minimum in the US) and make some noise.
Per-investor, yes — but multiple institutional investors can get involved with little intervention unless the founder holds at least a plurality. This is exactly why we're starting to see companies like Facebook and Uber issue class A shares. Travis Kalanick was, in theory, untouchable — he just didn't have the energy in him to fight the board after a personal tragedy.
> For that matter, Elon Musk only owns 21% of Tesla right now[1], so if 51% of the board think he's a net-negative, he could go immediately. They clearly do not.
Yes, and if he is forced to liquidate any more of his holding, he ceases to be a plurality. That's the point.
And my point is his "plurality" means fuck-all if a majority of shareholders or board members want a different CEO. Musk may have gotten the job originally because of his status as founder. He keeps his job because in the view of the shareholders and board he's doing a good job. And they could even choose to award him additional stock so he maintains his %.
Now yes, because he owns 21%, there are fewer other shareholder votes to oust him than there would be if he owned 10% (still a plurality). But they could do so in theory.
Also, I'll be upfront. I don't think a wealth tax is a good idea because it'll inevitably lead to people dodging taxes by putting the money into stuff like artwork or IP. And to counter that, the government will need to know every single item of value every person owns and have to create a large, intrusive bureaucracy to track all that. It sounds horrific.
But I don't think a wealth tax discourages entrepreneurship or working hard, and PG's blog post is disingenuous in saying so.
But there is external effects. Wealth translates into political power, how about people ending up disenfranchised by the excessive wealth of a small part of the people? They did not voluntarily give up their right to political participation.
Consider that the representative from Bezos' own district in Washington is a socialist.
At the end of the day, the greatest check on wealth's effect on political power is the fact that legislators can only win office if they can win a democratic election.
At the end of the day, the greatest check on wealth's effect on political power is the fact that legislators can only win office if they can win a democratic election.
It doesn't work like that. You donate to both sides of the aisle so you always have someone in your pockets. The famous cartoon from John Herzfeld about the "Millions behind Hitler" (this one: https://en.wikipedia.org/wiki/John_Heartfield#/media/File:He...) is bullshit. German industrialists did give substantial support to Hitler, but not for ideological reason, they'd have given to anyone in power. The cash did amplify Hitler's ability to implement his ideology, though, and the non-donors didn't choose that.
IIRC Bezos sells over $1B in Amazon stock per year to fund other things, but there is no outcry about how un-american it is that he has to "sell off his stake in his own company" to pay for his hobbies/lifestyle.