An underappreciated part of this story is that America’s wealthy once invested heavily in public infrastructure and shared systems.
Andrew Carnegie funded more than 2,500 public libraries and Rockefeller poured capital into public health and education.
Today, we’re watching Cuban and Phil Knight funnel money into NIL collectives to vault their favorite college football teams while core public systems are decaying.
Yes, inequality needs to be addressed through sensible taxation, but capital also shapes culture. When the most visible uses of wealth are private indulgence (St. Barts) rather than public goods, support for capitalism erodes.
If prominent investors want younger Americans to believe in the system again, the answer isn’t better podcasts or louder defenses of markets. It’s encouraging their peers to reinvest in the country that made their wealth possible aka make capitalism generous again.
Ed, great idea. How do you make it real? What is the next step. I borrow money to but a house. Is that taxable? I am not a billionaire but I have a large retirement account. What is the cut off point?
I am a retired tax partner and have studied taxes for over 40 years. A wealth tax has never worked, particularly given billionaires can locate anywhere. I fully agree that the best way to address this problem is somewhat higher income taxes but more importantly, individuals that over a certain income level should be taxed when they use stocks as security for loans. This is already in the tax code when installment sale obligations are pledged to borrow money.
I’ve heard this pitched before, but what I don’t understand is where are the billionaires getting the money to pay back the loans? Wouldn’t that be taxable income of some sort?
Two points: First the tides are changing. Socialism is no longer a dirty word and as much as the ultra wealthy don't like it their ability to contain it may be waning (see Mamdani). Secondly, it’s worth remembering Bismarck’s logic: give a little early, or risk having much more taken later. If you accept this logic then there are better ways to tax the ultra wealthy (and corporations) that provide both an insurance policy against populist rage and helps address the issues of affordability and signals to the middle class (especially Gen Z and millennials) that the system is responding to their needs. Restructuring social security so that some percentage (10-15% of life time benefits) are provided during the family formation years to be used for down payments for first time homebuyers or childcare would be more impactful. A small increase in corp tax (1-2%) and a gradual phase out of social security benefits beginning at $2 million of investable assets with a complete phase out at $10 million more than offsets the cost.
Hi Ed, I enjoy the innovation in your suggestion. Wrt Wealth Taxes I have a couple of comments, if you have time to review these/share your thoughts please:
1) Norway's 'exodus' of a very rich few
-> was in conjunction with increases of other capital taxes at the same time, as well as closing a loophole on escaping CG tax if one moved abroad for a short while. So I find the Guardian's article myopic.
2) Why no mention of Switzerland's successful wealth tax?
-> This allows Switzerland to encourage people in with low income tax (~20%), but funds functioning public services by evaluating the value of their assets annually, and sending them a tax bill. It accounts for 20% of each canton/district annual tax rev.
-> This is not unique to you, but I am alarmed by how many analyses of wealth taxes fail to mention that Switzerland has one. Often in the UK, the argument is 'well they'll go to Switzerland', to which I say - ....where they have a wealth tax...
3) Can you clarify -> Are the ultra-rich paying 24% in income tax vs 30% avg American? (to which I would flag income vs net worth, as an important disclaimer to that comment imo)
Would this be something that applies to those above a certain tax bracket? Would taking out a loan for a business count as taxable in that case? I like the idea, just thinking where the nuance would be.
Not a single additional tax dollar should be levied until all fraud is uncovered, punished and corrected. How can we say we need more money for public services if just in a middle-of-the-pack state like Minnesota it's been identified as $9Bn. Imagine what must be going on in California. Do we really think the extra money this proposal would bring is going to be managed well?
I liked the post, Ed; however, why do you use the clearly flawed “top 10% of incomes represent ~50% of consumption”? It’s intentionally misleading readers.
Intuitively, it should raise red flags. We know the top 10% receive a little over 50% of PRE-tax income, which is substantially reduced by taxes, and they also have a higher savings rate. Even if directionally correct, the exact figures matter, since most readers will take what you post at your word.
I think Jeff Bezos is the number one reason people hate billionaires. He flaunts his wealth in ways that are abhorrent, like an ad for why to hate them. One other thing you didn't mention is how many billionaires will pack up and leave California if this does pass. David Sachs apparently just did this and Chamath is looking at homes in Austin. The revenue lost from all of these billionaires leaving the state will probably be enormous without the measure passing.
The system is so out of whack, it might end in a French Revolution scenario, except the people who would be manning the ramparts are so dopamine and drug addled they can’t. As Prof G says it’s wealth, not income. They have Capital Gains taxes if they sell shares reserved for Pennie’s, or socked them in a Roth IRA, like Peter Thiel. They borrow against their ownership and have no income to tax. What a revoltin’ development this is…
Sure, taxing billionaires more would be great but I bet there is a larger jug to siphon from and that is the waste and fraud in the economy (I don't like saying abuse as well...2 descriptors are enough). If the Minneapolis fraud scandal is true, then magnify that by 1000x across the country. This is where the real money can be found to pay for healthcare, free day care, etc. The billionaires in CA seem to be happy paying their taxes now, staying in the state, spending their money in the community, paying property taxes on their giant estates. Why piss them off and drive them to Nevada, Florida, Texas etc. It makes zero sense. Tax on unrealized gains is the most short-sighted proposal, as Trump would say, "the likes of which the country has ever seen". Taxing loans to pay for their lifestyle seems reasonable. Taxes on unrealized gains? Only a stupid person would come up with that idea.
Btw, what do you tell the guy with $1b+ net worth on paper that can’t pay the 5% tax because his entire net worth is his company stock. He will have to borrow to pay the tax….so maybe taxing the loan as original suggested makes sense instead of taxing the unrealized gain itself.
And what happens if the stock tanks by 50%. Does owner get a refund for the tax he already paid.
The property tax being a tax on unrealized gains doesn’t make any sense. If I buy a coke for a dollar and pay 5 cents in tax is that a tax on an unrealized gain if I was going to try and sell the coke to someone else for $2.00 on a hot day? Property tax is what it is. It’s not a tax on an unrealized gains. There is a reason why all most every European country repealed their version of the wealth tax. It’s almost impossible to implement fairly across the board.
Real estate taxes are taxes on unrealized gains. Is that why Ron “steal $10 million from a charity and spend it against proposals to allow abortion and recreational marijuana use) DeSantis wants to eliminate it on homestead property in FL? No. It just hurts school funding and raises taxes on renters and commercial property.
An underappreciated part of this story is that America’s wealthy once invested heavily in public infrastructure and shared systems.
Andrew Carnegie funded more than 2,500 public libraries and Rockefeller poured capital into public health and education.
Today, we’re watching Cuban and Phil Knight funnel money into NIL collectives to vault their favorite college football teams while core public systems are decaying.
Yes, inequality needs to be addressed through sensible taxation, but capital also shapes culture. When the most visible uses of wealth are private indulgence (St. Barts) rather than public goods, support for capitalism erodes.
If prominent investors want younger Americans to believe in the system again, the answer isn’t better podcasts or louder defenses of markets. It’s encouraging their peers to reinvest in the country that made their wealth possible aka make capitalism generous again.
Ed, great idea. How do you make it real? What is the next step. I borrow money to but a house. Is that taxable? I am not a billionaire but I have a large retirement account. What is the cut off point?
Love the calendar idea and would enjoying seeing a pic Ed.
Also, great newsletter!
I hear you on coming back to the office after the long holiday...wtf is this work bit about?
Best to you, the gal, and the team for 2026!
I am a retired tax partner and have studied taxes for over 40 years. A wealth tax has never worked, particularly given billionaires can locate anywhere. I fully agree that the best way to address this problem is somewhat higher income taxes but more importantly, individuals that over a certain income level should be taxed when they use stocks as security for loans. This is already in the tax code when installment sale obligations are pledged to borrow money.
I see it daily
Color coded organizer ftw 💪🏻
I’ve heard this pitched before, but what I don’t understand is where are the billionaires getting the money to pay back the loans? Wouldn’t that be taxable income of some sort?
Two points: First the tides are changing. Socialism is no longer a dirty word and as much as the ultra wealthy don't like it their ability to contain it may be waning (see Mamdani). Secondly, it’s worth remembering Bismarck’s logic: give a little early, or risk having much more taken later. If you accept this logic then there are better ways to tax the ultra wealthy (and corporations) that provide both an insurance policy against populist rage and helps address the issues of affordability and signals to the middle class (especially Gen Z and millennials) that the system is responding to their needs. Restructuring social security so that some percentage (10-15% of life time benefits) are provided during the family formation years to be used for down payments for first time homebuyers or childcare would be more impactful. A small increase in corp tax (1-2%) and a gradual phase out of social security benefits beginning at $2 million of investable assets with a complete phase out at $10 million more than offsets the cost.
Too bad we didn’t grow up with the law of Jante like the Norwegians did!
What law is that?
It’s an old code they had which is EXTREME humility. Here are the precepts (with stupid perplexity source numbers, all wikipedia)
You’re not to think you are anything special.[1]
You’re not to think you are as good as we are.[1]
You’re not to think you are smarter than we are.[1]
You’re not to imagine yourself better than we are.[1]
You’re not to think you know more than we do.[1]
You’re not to think you are more important than we are.[1]
You’re not to think you are good at anything.[1]
You’re not to laugh at us.[1]
You’re not to think anyone cares about you.[1]
You’re not to think you can teach us anything.[1]
Sources
[1] Law of Jante - Wikipedia https://en.wikipedia.org/wiki/Law_of_Jante
Hi Ed, I enjoy the innovation in your suggestion. Wrt Wealth Taxes I have a couple of comments, if you have time to review these/share your thoughts please:
1) Norway's 'exodus' of a very rich few
-> was in conjunction with increases of other capital taxes at the same time, as well as closing a loophole on escaping CG tax if one moved abroad for a short while. So I find the Guardian's article myopic.
2) Why no mention of Switzerland's successful wealth tax?
-> This allows Switzerland to encourage people in with low income tax (~20%), but funds functioning public services by evaluating the value of their assets annually, and sending them a tax bill. It accounts for 20% of each canton/district annual tax rev.
-> This is not unique to you, but I am alarmed by how many analyses of wealth taxes fail to mention that Switzerland has one. Often in the UK, the argument is 'well they'll go to Switzerland', to which I say - ....where they have a wealth tax...
3) Can you clarify -> Are the ultra-rich paying 24% in income tax vs 30% avg American? (to which I would flag income vs net worth, as an important disclaimer to that comment imo)
I encourage some reading of Martin Sandbu (FT) e.g. https://www.ft.com/content/7ec2c02f-d304-419d-ad12-f1fcfcce86a0
Would this be something that applies to those above a certain tax bracket? Would taking out a loan for a business count as taxable in that case? I like the idea, just thinking where the nuance would be.
Not a single additional tax dollar should be levied until all fraud is uncovered, punished and corrected. How can we say we need more money for public services if just in a middle-of-the-pack state like Minnesota it's been identified as $9Bn. Imagine what must be going on in California. Do we really think the extra money this proposal would bring is going to be managed well?
I liked the post, Ed; however, why do you use the clearly flawed “top 10% of incomes represent ~50% of consumption”? It’s intentionally misleading readers.
Intuitively, it should raise red flags. We know the top 10% receive a little over 50% of PRE-tax income, which is substantially reduced by taxes, and they also have a higher savings rate. Even if directionally correct, the exact figures matter, since most readers will take what you post at your word.
https://x.com/LevyAntoine/status/1985127826207772920?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1985127826207772920%7Ctwgr%5E22484ad04b1809ed22dbc3461f274fdae5048205%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fwww.notion.so%2F2874f494dda4814caf67d9250d3a52af%3Fv%3D2874f494dda481ecab9d000cee1eeadfp%3D2cd4f494dda48174b197f13460324abdpm%3Ds
I think Jeff Bezos is the number one reason people hate billionaires. He flaunts his wealth in ways that are abhorrent, like an ad for why to hate them. One other thing you didn't mention is how many billionaires will pack up and leave California if this does pass. David Sachs apparently just did this and Chamath is looking at homes in Austin. The revenue lost from all of these billionaires leaving the state will probably be enormous without the measure passing.
The system is so out of whack, it might end in a French Revolution scenario, except the people who would be manning the ramparts are so dopamine and drug addled they can’t. As Prof G says it’s wealth, not income. They have Capital Gains taxes if they sell shares reserved for Pennie’s, or socked them in a Roth IRA, like Peter Thiel. They borrow against their ownership and have no income to tax. What a revoltin’ development this is…
Sure, taxing billionaires more would be great but I bet there is a larger jug to siphon from and that is the waste and fraud in the economy (I don't like saying abuse as well...2 descriptors are enough). If the Minneapolis fraud scandal is true, then magnify that by 1000x across the country. This is where the real money can be found to pay for healthcare, free day care, etc. The billionaires in CA seem to be happy paying their taxes now, staying in the state, spending their money in the community, paying property taxes on their giant estates. Why piss them off and drive them to Nevada, Florida, Texas etc. It makes zero sense. Tax on unrealized gains is the most short-sighted proposal, as Trump would say, "the likes of which the country has ever seen". Taxing loans to pay for their lifestyle seems reasonable. Taxes on unrealized gains? Only a stupid person would come up with that idea.
Btw, what do you tell the guy with $1b+ net worth on paper that can’t pay the 5% tax because his entire net worth is his company stock. He will have to borrow to pay the tax….so maybe taxing the loan as original suggested makes sense instead of taxing the unrealized gain itself.
And what happens if the stock tanks by 50%. Does owner get a refund for the tax he already paid.
The property tax being a tax on unrealized gains doesn’t make any sense. If I buy a coke for a dollar and pay 5 cents in tax is that a tax on an unrealized gain if I was going to try and sell the coke to someone else for $2.00 on a hot day? Property tax is what it is. It’s not a tax on an unrealized gains. There is a reason why all most every European country repealed their version of the wealth tax. It’s almost impossible to implement fairly across the board.
Real estate taxes are taxes on unrealized gains. Is that why Ron “steal $10 million from a charity and spend it against proposals to allow abortion and recreational marijuana use) DeSantis wants to eliminate it on homestead property in FL? No. It just hurts school funding and raises taxes on renters and commercial property.