Rep Ro Khanna faces Silicon Valley backlash after embracing wealth tax
cnbc.com
cnbc.com
We currently have 7 brackets capping out at $609,351 (37%) [1]. I say we add brackets at $2mm (39%), $10mm (41%), $100mm (43%) and $1bn (45%).
Then take away the stepped-up basis past 10x the median American's wealth (about $6mm [2]).
If you do it right, you could actually (increase) the thresholds on the lower brackets, thereby bringing the median voter's taxes down.
[1] https://www.irs.gov/filing/federal-income-tax-rates-and-brac...
[2] https://finance.yahoo.com/news/average-american-net-worth-62...
The current loop hole is that loans are not taxed so people take out loans against their assets thus never paying income tax. Tax those loans and refund taxes when the loans are repaid.
The loophole is the stepped-up basis. Loans are fine since they have to be repaid one way or another. Loans that defer taxation until the liability extinguishes itself are the problem.
Also I'd argue that the loophole is the not having to treat the loan as a concrete valuation/liquidity event, as the goal of most tax regulations is to prevent people delaying paying tax (with things like IRAs being exceptions).
But really, you should learn that this kind of inflammatory policing of the ingroup is very toxic, and only alienates people from your overall goal.
Soon continents, like Europe, are to expected to create their own solutions. The USA is becoming a liability.
Right now, income is the only thing taxed by the federal government. Unlike wage earners, the truly wealthy ( say over 100 million in assets ) only have income if and when they chose to do so. Every billionaire could chose to never pay a single penny of income tax - and remain a billionaire - forever. And that's exactly what they do. They do not pay income tax. Unless they have an asset readjustment reason to do so.
The All-In Podcast hosts have already said they are looking at moving out of CA if this passes. If you’re wealthy you’d be fiscally irresponsible to stay. Wealthy will flee leaving a socialist state which only supports those who depend of the state. We all know that works out.
Democrats vilifying the wealthy, while strategically might be effective is frankly un-American and is breeding a population of pessimistic, disillusioned, radical socialists.
That means a lot more to me than your grumpy, politically charged anecdote.
Well, between you and her, I'll take the senator, former Harvard Law professor, and architect of the CFPB.
Warren was "cool" 10+yr ago when she was a fairly niche issue academic on the fringes of federal politics. Obama should have made her head of the CFPB as that was here whole thing.
Instead she sold her soul to the DNC and became a useless unremarkable senator who just spews whatever party line drivel the consultants say the median voter is receptive to that day. This would be excusable if she was just another crap politician but based on her prior work she's clearly capable of better.
I question if you know what they do. They are the ones who establish the official baseline platform for the party. Calling them out specifically vs just the party is basically like calling out a local board vs the entire municipal government.
San Francisco used to be a city where normal people could afford to live. The current insane price of housing was caused primarily by the growth of the tech industry. It's true that the tech industry in California created a vast amount of wealth, but that wealth is concentrated into relatively few hands, especially the billionaires. The wealth did not trickle down to normal people; what did trickle down was housing inflation and gentrification.
If the tech industry left Silicon Valley—and there's no inherent reason why it needs to be concentrated in Silicon Valley, given the technology to work from anywhere—perhaps San Francisco would be better off in general and return to normalcy.
If they are simply taxing whatever loose cash and personal (mostly luxury) assets people have, then yeah I don't expect it will shake things up very quickly, paying an extra ~5% to live in San Francisco isn't the biggest deal if it stops there.
By owning stock.
I'm not sure that "on paper" is a particularly interesting qualifier. I'm not a billionaire, but most of my wealth, such as it is, is "on paper". I have some cash on hand to pay expenses (technically, a checking account, and less than $50 in physical bills and coins), but you're probably losing money if you're keeping most of it in cash and not investing it on something with returns.
> Capital used to produce things.
The reality is much more complicated than this simple statement. An IPO is a one-time cash infusion for the company; subsequent sales of the shares on the stock market may bring additional cash to the shareholders, but not to the company. A company may issue additional shares, but this requires approval of the current shareholders, who probably won't look kindly on dilution. I think the main use of this is not to raise additional capital from the public but rather to compensate employees. (Sometimes companies do the opposite: stock buybacks, where the company gives cash to stockholders rather than vice versa.)
One primary purpose of an IPO is not to raise new capital but rather to compensate the company founders/executives and initial private investors. So you could say that stock indirectly produces things by enticing investment. But a lucrative IPO requires that the company already produce something of value before the IPO.
A successful publicly owned corporation does not require further capital infusion from investors, because sales of the corporation's products to customers are more than sufficient to fund continued operation.
> you simply end up driving much of those capital investments elsewhere
It's questionable how much these investments actually benefit the community. For example, if labor is brought primarily from outside the community, then existing residents do not necessarily benefit from the spending, and they may find themselves priced out of their own community by the incoming labor force.
> If they are simply taxing whatever loose cash and personal (mostly luxury) assets people have
No, that does not appear to be the design or intention of the proposed wealth tax.
Yes often stock, although this can be confusing for ownership portions in private equity because the incorporation often does use stock as a form of ownership but not the publicly traded kind as one often thinks of (this why I prefer a more generic 'capital'). The key here is ownership of things that facilitate the production of goods and services. These usually represent by far the largest portion of wealth billionaires have, its almost never mostly horded as mostly unused or non-productive wealth but rather representative of ownership of productive assets that bring goods and services to fruition.
>I'm not sure that "on paper" is a particularly interesting qualifier. I'm not a billionaire, but most of my wealth, such as it is, is "on paper". I have some cash on hand to pay expenses (technically, a checking account, and less than $50 in physical bills and coins), but you're probably losing money if you're keeping most of it in cash and not investing it on something with returns.
A large portion of people have their assets mostly in real estate, vehicles, demand accounts, personal tangible assets. The median household stock ownership is $~50k of $~200k in median household net worth. Having most wealth "on paper" is very much a situation of note from the viewpoint of the common person, and your position puts you closer to the billionaires in this regard.
>IPOs
Stock ownership is literally the ownership of the company and thereby the productive capital. Wealth tax on stock is a punishment for owning productive assets, and also a punishment for creating productive assets. You are trying to sidestep this by arguing whether the purchase of the stock itself adds investment while ignoring the stock itself is a fractional title of the productive assets.
>It's questionable how much these investments actually benefit the community. For example, if labor is brought primarily from outside the community, then existing residents do not necessarily benefit from the spending, and they may find themselves priced out of their own community by the incoming labor force.
This is a fully informed acknowledgement you simply don't seem to care if the investments leave the community.
Your attitude seems to be something akin to, well, if the biggest productive capital holders want to leave then it probably doesn't matter for the community anyway. I can respect that. You know what you want and you're willing to work to get it.
I wish you the most sincerest of luck. Although I'm not in favor of these kind of zero sum games, I will definitely welcome the movement of investment out of California and into my state where it definitely will not benefit my community.
I think this is so vague as to be useless. Does ownership of cash not facilitate the production of goods and services? The cash certainly gets spent on goods and services. Does home ownership not facilitate the production of goods and services, namely, homes, as well as the goods and services that maintain homes?
Your distinction between productive and non-productive seems like BS to me and just a way of making rich people appear superior.
My point was that when you spell out exactly what "facilitate" means, sitting on a bunch of stock waiting for it to appreciate in value isn't particularly "productive". Bill Gates is richer now after he stopped working than when he was CEO of Microsoft, despite the fact that he claims to want to give away most of his money. It seems that he can't give it away faster than he passively makes more.
> Having most wealth "on paper" is very much a situation of note from the viewpoint of the common person, and your position puts you closer to the billionaires in this regard.
Well, I rent rather than own my home, so I have no real estate assets. Does that fact alone make me more "productive"?
> Wealth tax on stock is a punishment
No. Fines are a punishment. Prison is a punishment. Probation is a punishment. Tax is not a punishment. Taxes are how the government funds public services, and everyone pays taxes in one way or another. The point here is to tax based on ability to pay, and billionaires have more ability to pay than anyone else.
As everyone admits, billionaires are free to leave and avoid paying the tax. This is not true for fines, prison, and other punishments. If Peter Thiel leaves, no arrest warrant will be issued.
> This is a fully informed acknowledgement you simply don't seem to care if the investments leave the community.
According to the submitted article, Khanna himself said much the same about the prospect of Larry Page and Peter Thiel leaving.
You believe you know exactly what it is, based on your confidence with which you assert your position on 'taxing' these assets. I am not going to entertain this feigned ignorance further by entertaining the false equivalence between a pile of cash or a gold watch sitting somewhere and something like a computer actively crunching the most efficient shipping routes. If you own stocks instead of a personal residence because of its superior productive capability that return you a profit, you already understand this intuitively, in fact I think you understand it more or less completely.
I am also free to leave Iran to not be executed for being an apostate, that doesn't mean it's not a punishment, it just means if you never do the thing under the conditions of punishment you won't get punished for it. Many here explicitly acknowledge this tax is punitive -- they argue the price of living and rent/homes is too high in CA and it'd be better off if many of those who 'gentrify' go elsewhere so the prices will come down.
I believe your position is an informed one. You are pretending like mine is not. Indeed, I think we both have informed opinions, yours is one intended to drive out productive assets from your state and mine is one intended to bring productive assets to my state. I believe with fewer productive assets our labor becomes less and less competitive; there's no shortage of places on earth with lots of (relatively destitute) smart educated people who can work efficiently -- a golden thing about California is they also have the tools and assets to produce even larger returns on that labor.
In the end the billionaires won't notice the missing 5% in terms of feeling a change in their quality of life, I would agree with you there. But the poor and middle class likely will notice themselves getting poorer after taxing the productive capital of billionaires, and watching some of the life blood from which they make their living float away.
If you define the productivity of an asset as the ability to return a profit to the owner of the asset, then yes, I understand that aspect more or less completely.
However, when you talk about "ownership of things that facilitate the production of goods and services," this seems to be a quite different distinction. As far as I can tell, you appear to be positing that we have the ultra-wealthy to thank rather than the masses of workers and consumers for whatever prosperity we may have, which I don't agree with.
> Many here explicitly acknowledge this tax is punitive -- they argue the price of living and rent/homes is too high in CA and it'd be better off if many of those who 'gentrify' go elsewhere so the prices will come down.
I think the policy is intended to raise money from billionaires, not to drive all the billionaires away. It's crucial to note that not all billionaires are threatening to leave, only the billionaires who don't appear to give a crap about their community. As you say, "the billionaires won't notice the missing 5% in terms of feeling a change in their quality of life", so why would they leave their homes unless they cared little for their communitity, valuing only the maximization of their own wealth?
The point is that the people who benefit most from society should contribute back the most, to make it better for everyone. But some ultra-greedy individuals want to have everything, giving nothing back, and I think both Khanna and I feel that it would be no great loss for these antisocial individuals to leave the community.
> I believe your position is an informed one. You are pretending like mine is not.
Not at all. I believe that our difference is ideological rather than informational.
> Indeed, I think we both have informed opinions, yours is one intended to drive out productive assets from your state and mine is one intended to bring productive assets to my state.
To clarify, I don't live in California. But I don't want Peter Thiel to move to my state either.
I would actually favor a system in which the tax rates are uniform, so the ultra-wealthy could not "shop around" for the best rates. In theory, capitalism is supposed to entail capitalists competing against each other to attract consumers, but instead it has become a perversion of that ideal, where governments compete against each other to attract capitalists. Consider how these same billionaires threatening to leave are also threatening to primary Representative Khanna. Our election campaigns are privately funded, which means that for those who can afford it, our government and its policies are for sale. (As far as I'm aware, no candidate has declared the intention to challenge Khanna. Rather, it seems that the billionaires intend to "recruit," i.e., fund, a candidate who will be a paid lackey for them.)
> But the poor and middle class likely will notice themselves getting poorer after taxing the productive capital of billionaires
I disagree. I doubt that we'll get anywhere by arguing the point, because this a longstanding ideological controversy that has already been argued ad nauseam, but perhaps my own position would make more sense in light of this belief of mine.
Tech thrives on the mobility of talent, so it's no coincidence that California is where the tech industry thrives. Almost 70 years ago, eight engineers at Shockley Semiconductor had a better idea and left to start Fairchild Semiconductor. That led to Intel, AMD, and National Semiconductor, later spawning NVIDIA, SGI, Qualcomm, and ultimately creating trillions of dollars in wealth. No other state will ever overtake California's dominance here unless it allows for that same mobility of talent. Almost every state tries to _attract_ billionaires these days, but this is one reason why most states can't _create_ them.
In many ways California is just being capitalist like the "actual" capitalist and taxing whatever the market will bear. It will probably bear a lot in California. There's no need for them to dress it up as a social project, it's just the ruthless gears of the state run by people with personalities nearly identical to the CEOs that would also do the same thing in their shoes.
The poor will continue to suffer the ~same fate and the friends of politicians will continue to be enriched. The middle class sees maybe the ever tiniest budge from one or two billionaires pulling out along with whatever jobs their capital provides, but otherwise their lives basically move on as usual and they can preach about their support for the poor using someone else's dime at almost no risk to themselves.
Source?
(I live in Wyoming. Every time I’ve looked up stats for the East Coast, the millionaire exodus has turned out a myth.)
I'll let all my neighbors know they are pessimistic, disillusioned, radical, socialists! And to think we were just talking about how amazing the weather is right now and how grateful we are to live at the beach! Boy were we wrong!