POLL: Why Warren's wealth tax plan is the worst thing ever
Warren's tax plan in one sentence:
3% wealth tax per year for >$1B and 2% for >$50M.
Why it is worst thing that could take US to deep shit:
Let's take the example of Bill Gates. Bill Gates is worth $100 Billion, but that’s almost entirely in stock. Under the Warren proposal, he would suddenly owe over $6 Billion in taxes.
In Scenario 1, he simply signs over $6 Billion worth of Microsoft stock to the federal government, and other billionaires do the same thing with their stocks, and the government is suddenly a major player in many large firms. That’s not good. Imagine the government owning millions of shares of major companies and meddling as activist investors (as you know they would).
In Scenario 2, he has to sell enough stock to raise $6 Billion in cash. When this happens, it represents as much capital flowing out of Microsoft as they normally see bought and sold over several days. With this much added supply to the equation of available stock, the price would go down, which would mean he would have to sell even more shares to get the cash he needs, which would drive the price down even further. He started out with a net worth of $106 Billion, he tried to pay his $6.1 Billion tax bill, and the stock price drops 10% because the market is flooded. He now has to sell more shares and the shares he has left are worth less, so the wealth tax of “only 6%” has suddenly dropped his net worth from $106 Billion to $85 Billion.
Now, imagine these scenarios playing out over 700 times as there are more than 700 billionaires in the U.S. who would lose a significant chunk of their assets.
That’s a recipe for a depression.
But wait, it gets even better!
Now we look at the fact that many of those people with >50M net worth own one single company that is worth like a $100M or so (imagine a sports franchise). Suddenly they are hit with a tax bill in the millions of dollars for which they have no readily available cash. They can’t sell their asset, because there’s not a huge demand and there are strict rules regarding the transfers of assets like that (and the folks who can afford to buy those assets are pretty strapped for cash themselves). What happens with these folks? Layoffs, pay cuts for employees, and bankruptcy. Woo Hoo!
Ultimately, all of these things would depress stock prices, and impact the common investors (as well as mutual funds, 401(k) plans, and pension funds). This might be one of the worst economic ideas in the history of the U.S.
Source: Scott Biddle
Why would anyone vote for such shit?