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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.
This got me to thinking: why not have a unrealized capital gains tax on human capital? If you get a degree of any sort, 44% of the assessed increase in human capital is due in taxes. Net present value of a bachelor's degree is somewhere between a quarter and a half million dollars
This reminds me of Matt Levine's observations on net worth calculations. Own a small business (maybe you're even the only employee) that made $200k last year? Well, we're going to assume it will continue to make $200k/yr for some number of years, do a net present value calculation, and blam, your net worth is however many million. You're a lawyer who works for The Man and makes $200k/yr? Whaddya got in the bank? That's your net worth.
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How would that compare to a model offering education for a percent of future earnings?
Admittedly, I’ve heard about that mostly due to some massive fraud.
It would incentivize different things. A flat tax on imputed human capital appreciation would encourage people to either not get a degree or to go for careers that pay a lot. Education for a percentage of future earnings would encourage people to go for low paying careers with a good work life balance.
To make it a truer analogy to the proposal, probably different degrees should have different human capital gains. So educational programs that increase human capital more would incur more tax.
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See also The Unincorporated Man, in which every person is "incorporated" at birth into tradable shares, of which the parents get 20 percent held jointly, the government gets 5 percent, the person cannot sell the last 25 percent (which is enough for him to support himself in this high-productivity future setting; the percentage might have to be higher in the present day), and the remaining 50 percent can be sold off to pay for education and other needs.
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Wouldn't this just mean increasing the student loan interest rate?
It would probably usually end up being the loan principal. Maybe since it'd be a bigger loan, the rate would be a touch higher.
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Only if you have a student loan.
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