Re:Modeling a Wealth Tax
by graeme on Tuesday August 18, 2020 @06:16PM
(#24204991)
Something I haven’t quite wrapped my head around. Many reasonable critiques here say “wealth appreciates about 6% per year, so nobody will lose money with a 1% tax. You gain 5% per year”
But Graham’s post talks bout stock. See this:
> And at 5% this threshold is getting asymptotically close to being an upper bound on how much of the company you get to keep.
We actually have a real life example of such a founder. Warren Buffett owns about 18% of of Berkshire Hatheway. He took control of Bwrkahire Hatheway 58 years ago. So had there been a 1% wealth tax, Buffett would only have about 9% of Berkshire.
You get a larger effect the larger the tax. The result is gradual loss of control of the company shares.
People have been focussing on the performance of a mixed stock portfolio. But from the perspective of a startup founder who wants to maintain active control over a company for a long period, Graham seems to have raised a central point. Other than massive debt, there would be no way to keep the same stock share if a wealth tax took part of it year on year.
Re:Modeling a Wealth Tax
by lacerta on Tuesday August 18, 2020 @06:59PM
(#24205342)
I believe that is angle Graham was coming from. At a certain point you wouldn't be able to afford to control your own company. You would HAVE to sell your shares to cover the costs of the tax.
But Graham’s post talks bout stock. See this:
> And at 5% this threshold is getting asymptotically close to being an upper bound on how much of the company you get to keep.
We actually have a real life example of such a founder. Warren Buffett owns about 18% of of Berkshire Hatheway. He took control of Bwrkahire Hatheway 58 years ago. So had there been a 1% wealth tax, Buffett would only have about 9% of Berkshire.
You get a larger effect the larger the tax. The result is gradual loss of control of the company shares.
People have been focussing on the performance of a mixed stock portfolio. But from the perspective of a startup founder who wants to maintain active control over a company for a long period, Graham seems to have raised a central point. Other than massive debt, there would be no way to keep the same stock share if a wealth tax took part of it year on year.
Or am I missing something?