What a glorious thought, I’mma gonna have to steal this

Jeff Bezos gave umpteen billion to the ex Mrs Bezos. So the state would have had to give him a massive tax rebate on his reduced wealth, right?

aaa in comments.

Quite so, if rises in uncrystalised wealth are to be taxed – the current insistence – then losses should generate rebates.

13 thoughts on “What a glorious thought, I’mma gonna have to steal this”

  1. I put £100 on ‘Dead Zinger’ at the races. It lost.
    My wealth is thus reduced by £100, I demand a tax rebate!

  2. Which is of course why winning on the dogs (etc) isn’t taxed.
    If you get taxed on your winnings, then you can offset your losses…

  3. “Quite so, if rises in uncrystalised wealth are to be taxed – the current insistence – then losses should generate rebates.”

    That doesn’t make any sense. A wealth tax automatically gives you a rebate if the value of the assets falls, you pay less tax in that year. Wealth taxes would be based on the value of assets held on a certain date, its a tax on a snapshot of your wealth, levied on a recurring annual basis. There is no way you can pay ‘too much’ and then be due a rebate because the assets fell in value after the assessment.

    All that happens in the Bezos case is that his tax bill drops massively next tax year. One assumes there is a qualifying date for a wealth tax, everything owned on date X would be taxed at Y%. Then he gives half to his ex, and on date X the following year his assets would be far lower and his tax bill the same. No rebates required.

  4. By God, ex-Mrs Bezos would have a bill to pay! Still, since she plans to give it all away, what care she?

  5. @Jim

    No, no, it does make sense. At least it makes as much sense as looking at the increase of a squillionaire’s wealth and pretendy-taxing it as if that increase is income. Which is what the ProPublica calculations do.

  6. To the extent wealth his held in listed stocks it can be assessed with some accuracy. To the extent it is held in land, buildings, private companies, or other assets, then the appraisal industry will boom. As will lawyers who specialize in challenging appraisals.

  7. “To the extent wealth his held in listed stocks it can be assessed with some accuracy.” Only on the convention that all shares are worth their listed price. But if a thing is worth what you’d get if you sold it, then shares will tend to be worth less than the listed price if you try to sell a humongous heap of them. Perhaps very much less.

    You might almost say that the point is a contrast between an accountant’s view and an economist’s.

    I suppose your “some accuracy” is intended to cover the point though I don’t think it really does.

  8. A lot would depend on how big a bite the wealth tax cut took. The business has a market cap; the sum value of all its listed shares. If a large shareholder had to sell a chunk it would probably depress prices for a bit, affecting all shareholders’ wealth. The question arises if once that chunk of shares had been absorbed by the market at large would the market cap of the firm tend to go back up to where it was? Perhaps; perhaps not. Certainly the effect would be less if the wealth tax just took a nibble. Ok, share prices will go up and down by the fraction of a second, but the tax would be assessed at a point in time. I get brokerage statements each month that tell me what my account is worth at the end of each month.

    The point that shares in a listed company can be more readily valued than substantial holdings in a private firm or real estate seems valid enough to me.

  9. Jim:
    “A wealth tax automatically gives you a rebate…”

    But they aren’t suggesting a wealth tax – they are suggesting that the change in wealth (they implicitly assume that wealth monotonically increases) be treated as income. If so, the point stands – a decrease in wealth is a loss, a negative income. In most cases, though, losses don’t lead to refunds, but to loss carry-forwards to apply to future “income.”

  10. So the state would have had to give him a massive tax rebate on his reduced wealth, right?

    No.

    Why?

    Because the state has people who are willing to torture and kill you and you aren’t able (or even willing) to respond in kind.

    It all comes down to who’s willing and able to do the most violence to the most people. We like to church it up with ‘legitimacy of the state’ and all that – but its still violence that underpins all rights – personal, property, however you want to divide them up. We just like to pretend the state using the guns on our behalf is moral while using them ourselves is not.

  11. TD – quite, interesting isn’t it?

    The current Mkt Cap of say Amazon, is based upon the free float, the number of shares that can be considered to actively trade. So Bezo’s holding might not be part of that, if he or other investors are thought to be effectively locked in.

    If the free float were to increase, then the liquidity premium on the existing free float would shrink, depressing returns. Before you start to figure out just how many shares you can feed into the daily/weekly turnover without moving the price against you.

    And there’s a potential knock-on effect to private equity holdings as well, as they are valued at a discount (reflecting the liquidity premium again) to the closest listed equivalent firms. If those listed valuations are depressed, then so are the PE valuations.

    And then there are capital structures where the economic and control rights are split between classes of equity.

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