Here it is, the progressives’ tax policy: “Let’s just take their money." And that is the deep thought that was put into the Make Billionaires Pay Act which was proposed in Congress last week. As Rob Emanuel famously said: “You never let a serious crisis go to waste. And what I mean by that is it's an opportunity to do things you think you could not do before.”
Senators Sanders, Markey and Gillibrand introduced the Make Billionaires Pay Act. Of course, it is supported by the regular cast of characters: Omar, etc.
The bill is very straight forward: (1) Calculate the fair market value of your assets on December 31, 2020 and (2) subtract the greater of $1 billion or the fair market value of your assets on March 18, 2020. Multiply the result by a 60 percent wealth tax. The plan is to raise $731 billion to fund health care.
Even Bernie Sanders cannot tie the cause of the pandemic to billionaires. His envy long ago turned to hate.
What could be wrong with this idea? Arbitrary and capricious. Unconstitutional.
If this is okay today, there are no limits to wealth confiscation and the wealth baseline could be $500,000 or any other amount next year or next week. And, of course, none of the impacted individuals could raise the funds to pay the tax without crushing the stock prices of their companies and therefore the wealth of their shareholders, be they individuals, pension funds, etc.
Arbitrary and capricious: In the accompanying press release, the bill’s authors promise that Mark Zuckerberg would pay $22.8 billion in his one-time wealth tax on a net worth of $92.7 billion, up from $54.7 billion at March 18th.
Where did March 18, 2020 come from? This was the lowest closing price of Facebook in 2020. (Facebook’s stock was $210 per share on January 1st, $147 on March 18th and $268 last Friday). Mr. Zuckerberg’s wealth at January 1st was about $72 billion. Stocks go up and down. The proposed tax on Mr. Zuckerberg would be essentially a little over 100 percent of his wealth accumulation thus far in 2020.
And exactly how would Mr. Zuckerberg generate the $22.8 billion to pay his one-time wealth tax? He would have to sell about $34 billion of Facebook stock paying about $12 billion in state and federal income taxes to pay this one-time wealth tax. (This ignores Joe Biden’s plan to double the capital gains tax and California’s recent proposal to raise its tax rate to 16.8 percent). If, for some reason, the Facebook stock price did not collapse from the flood of Zuckerberg stock sales (impossible), he would finish 2020 with his net worth down 25 percent Of course, the stock price would get slaughtered and everyone who owns Facebook stock would be hurt.
The proposers state that Jeff Bezos would owe $42.8 billion which would cause him to sell $54 billion of Amazon stock to raise the money to pay his income taxes and the wealth tax. (His home state has no income tax).
Why has the net worth of Jeff Bezos exploded in 2020? It is because his company, Amazon, quickly became every American’s gateway to purchase life’s necessities during the pandemic? This is a company that has never paid a dividend and reinvested every dollar of earnings into company growth since its inception. Where would most Americans and the U.S. economy be in 2020 without Amazon?
Unconstitutional: Yes, there are a few scholars who believe and argue with great passion that a wealth tax is constitutional based on their various theories that would need the Supreme Court to conclude that various previous Supreme Court cases over the past 100 years were wrongly decided. Chief Justice Roberts seemingly put this to bed in his brief discussion on direct taxes in N.F.I.B. v. Sebelius on 2012. A wealth tax is not constitutional.
If the Congress of the United States has the power to wake up on a Wednesday morning and decide to take an estimated $731.8 billion from a large handful of billionaires, the following Wednesday morning, they could decide to take anything from anyone. And that should scare everyone to death.