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Notes -
Theory — the new unrealized capital gain tax is designed (or will have the effect of) forcing people like Elon Musk to surrender control of corporations resulting in PMC control instead of founder control.
As some detail, there is a proposed 25% tax on unrealized gains for the super wealthy coupled with a 44% tax on realized gains. So let’s say you own 10b of a 100b company. If you do nothing you will owe 2.5b of tax. But if you sell 2.5b, you’d actually owe more! So you end up having to sell a pretty big chunk of your stake. This means that before companies get really large founders have to sell a big chunk of their equity preventing super wealth. It also changes incentive structures for founders making them more likely to cash out.
Once they cash out, PMC will take control. PMC coexists with modern democratic policy. Therefore, the democrat tax proposals help ensure corporations are run by allies.
I don’t see a tax on unrealized gains passing. The entire lobby of every super rich person in the US would have to fail, and that would surely represent an extraordinary failure.
The better approach would be to tighten up estate taxes so that the wealthiest families have a ‘minimum required tax burden’ to pay when a patriarch dies, regardless of what measures they’ve taken to transfer wealth in life. So if Bob dies having unquestionably accumulated $500m in his life,
In any case, this wouldn’t require anyone to relinquish control, because you could borrow against your equity to pay the tax bill.
I have wondered if replacing income tax with a tax on expenditures would fix some of these questions. Sure, the rich might accrue huge bank accounts, but money isn't actually useful until it's spent. Something like a flat percentage (or maybe progressive) on anything over the computed cost of living for your family. Sure, this has its own questions: does buying investment assets count? Does it have a negative version of the EITC? Can you pro-rate multi-year expenses? I think you might be able to balance timing expenses pretty reasonably with cumulative lifetime values (math: a conservative vector field, although we could do this with income tax already). How do you deal with cash tips?
Maybe it's more bookkeeping to track expenses, but those are starting to be almost entirely automated systems that could make this feasible. But I'm also not really sure it's a better system, just a different answer to a problem with no ideal solutions.
I suspect if you had a button you could press that would make the 'rich' consume less over their lifetimes, other people consume more over their lifetimes and the 'rich' to increase their share of capital then a lot of the people pushing the unrealized capital gain tax would not support pressing the button. for them its not just about fairer consumption but also about who controls capital. so this kind of kills broad support for a consumption tax even if you are able to make it fairer in terms of lifetime consumption.
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