Reply to California's Wealth Tax

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]NP. It is idiotic. Among other profound issues, it will destroy the startup ecosystem that is making and has made the US into a global technology powerhouse because it doesn’t differentiate between realized and unrealized gains. So, a young person who has no hard assets whatsoever but who founds a company that gets paper-valued at (say) 5 billion to justify a $500m cash investment will suddenly have a completely unpayable tax bill the day after closing a successful funding round. This would have killed every single transformative technology of the last 30 years in the cradle.

As far as I can tell, the people supporting this want just want to cede every single successful market segment the US has created to Chinese dominance. It is short-sighted and utterly stupid. I mean, it’s stupid to the point where the conspiracy theorist in me is wondering if the CCP is funneling money into social media to drive up support for it, so the US startup market will be killed off. I don’t really think that, but it has crossed my mind. [/quote]

Yeah, there's an issue with illiquid assets, especially in volatile industries. I think it could still be manageable at a lower tax rate though (5% is insane).
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5% is a very bad idea. If they want to raise more tax revenue without encouraging outmigration, they should create an alternative minimum tax calculated based off net worth. Eg. AMT is 0.1% of net worth. Net worth of 2 billion dollars, AMT would be $2,000,000 if regular state income taxes are less than that you would owe the difference up to 2M. This AMT would be assessed every year to minimize the benefit of state tax avoidance strategies. [/quote]

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