2 cents of what

Posted on: January 14, 2020 at 21:54:24 CT

The value of publicly traded assets, i.e. stocks and bonds, is relatively easy to calculate. After that it gets rather murky. I.e. closely held businesses whose stock isn't publicly traded. Wealth in the form of physical assets, i.e. buildings and land. Yes, values can be determined, but it's not an easy process.

Couple of examples: the common way to borrow Jeff Bezo's (sp?) Amazon stock is to multiply the number of shares he owns by the current market price. However, there's an argument that he owns so much stock that if it all comes on the market at one time, it will depress the market price and therefore its worth less than the current stock price times the number of owned shares.

Another example is physical assets, i.e. land and buildings. Determining the actual value is really a matter of opinion. Assume the assets have a $100 million value. The IRS could argue and probably make a reasonable case in many situations that they're worth $110 million. Conversely, the taxpayer can probably make a reasonable case they're worth $90 million.

Another aspect of the wealth tax is it will likely have a depressing affect on asset values. I.e. it's going to be more expensive to own assets and therefore, the rate of return on them may be depressed and a lower rate of return translates into less value.

World wide a number of countries, about twenty if memory serves, have implemented wealth taxes and they have generally generated less revenue than anticipated. Some nations have abandoned them as more trouble than they're worth.

Another factor is persons subject to the wealth tax will restructure their affairs in such a way to minimize the wealth taxes. I.e. it will lead to a repeat of the off shore tax game.