Microblog Memes

How does that work in practice? Let’s say we want to tax people like Musk, Bezos, Zuckerberg. Let’s say for convenience we want to set the tax at 10% of their total net controllable assets.

Take Musk for example. He has an estimated net worth of $500 billion so we’re going to tax him $50 billion a year. To pay his taxes in the first year he’d have to sell 10% of his shares in his companies (since his wealth is concentrated almost entirely in stock).

What would happen if he offered 10% of his shares for sale on the open market? It would cause the stock price to tank since there aren’t enough buyers out there willing to pay the current price for those shares. As the stock price tanks, his net worth plummets along with it, say to $400 billion. Now he has to sell 12.5% of his shares to pay his $50 billion tax bill. But that means offering even more shares on the market which cause the stock price to drop even more.

At the end of the day, just forcing Musk to pay his tax bill could completely wipe out his company. Maybe that’s actually your goal, but it’s not clear how that will raise money to help people.

And that gets to the point I actually want to make: stock prices as a form of wealth are somewhat fictitious in nature, not unlike the way money is created by banks through fractional reserve banking. Trying to tax all those shares of stock is similar to creating a bank run. Rather than unlocking a bunch of wealth you can use for other purposes, you just end up destroying the wealth altogether.

Here’s a video by an accounting professor that explains what stock prices really mean by way of an analogy with baked beans (yes, he’s a British professor)!