How Should Billionaires Be Taxed?
Summary
Aswath Damodaran, a finance professor at New York University’s Stern School of Business, said that the proposal would have created a huge windfall of tax revenue in the first year, when assets are first marked to market, but after that it would be “trench warfare year after year to see how much you could collect.” A billionaire could, for instance, transfer liquid assets like stocks to illiquid assets like real estate and art, where different rules might likely apply (as in the Democrats’ ill-fated proposal). Others argue that taxing tradable assets, like executives’ shares in their companies (the source of many of the biggest fortunes), gives the government a leg up in this game. Such a tax is hard to avoid because it “directly targets corporate stock in publicly traded companies and such data is already reported,” said Emmanuel Saez, an economics professor at the University of California, Berkeley who studies tax policy and inequality. “People will find ways to game, and the smaller the tax base, the bigger the risk, especially if they’re rich, smart, well-resourced people,” said Shivaram Rajgopal, a professor of accounting and auditing at Columbia Business School. “So you ideally want a bigger base if possible.” For this reason, he prefers the compromise that survived in Mr. Biden’s proposed framework: an additional 5 percent tax on annual incomes above $10 million and an extra 3 percent tax on incomes above $25 million.