Work Reform

I think what we would see in response to that is people hiding their wealth offshore, through private companies, through family members, trust funds, non-profit foundations etc.

So the billionaire has 10 relatives and hires each of them at his company, giving them all stock options as a bonus, which come from his own personal accounts. Then when it comes to tax time he’s managed to limbo his way under the $1B bar.

Take all your wealth and use it to set up a bunch of non-profit organizations for preserving national parks or saving the rainforest or running homeless shelters. Then have those foundations hire your family members to the boards of directors and pay each one millions of dollars in salaries.

There are countless ways to do this. Not just for individuals but for companies. Apple is pretty infamous for its use of Ireland as a tax haven that allows it to avoid paying corporate (profit) taxes on all its sales in the EU.

The other issue I foresee with the maximum wealth limit is how much chaos it could cause for companies. Let’s say you found a furniture company and run it really well and hire tons of employees. Then over time it grows above the billion dollar limit, so in order to pay your taxes you sell off the company to private equity who proceed to liquidate all its assets and fire all the employees. Without the limit in place you may have been happy to keep running the company and maintaining a great workplace for all your employees but the giant tax bill forced your hand. In the end, the company is largely destroyed, everyone has lost their jobs, and you retire with your billion dollars in cash.

I think the above scenarios are problematic no matter what you set the limit to. It also doesn’t address the issue of private companies (not traded on the public stock exchange) which don’t have a nominal market value. Sure, they have a book value for all their hard assets, but that can be far lower than the true value of the company.

Think of something like Snapchat which went from maybe a dozen employees and a bunch of laptops to rejecting a $3 billion buyout offer from Mark Zuckerberg just 3 years later. Anyway, also how to deal with that? Let’s say you have a small company making calculator apps for iOS and Android. You earn $10,000 a year in profits from sales. Then some group of investors come together and offer you $10 billion for your company. Is your company now worth $10B just because of the offer? You’re not on the stock market. You barely make enough money to pay rent, yet come tax time you owe $9B.

You could say “well you rejected the offer so you don’t owe the government anything because you actually aren’t worth $10B.” But who decides what you’re worth? Snapchat rejected the $3B offer but most investors would’ve agreed they were worth it. But all they had was a few employees, some laptops and servers, and the app they made. They’re really not much different from the hypothetical calculator app company.