Wealth Tax

Paper Assets

I once had a strained conversation with a good friend over the concept of a wealth tax. I was for it; he was very much against it, on the grounds that most of the “wealth” we’re usually talking about is in the form of stocks, which are “paper money.” He feels that this sort of asset is useless unless sold and converted to cash, when it will be taxed, if any gains are realized, and all’s fair in love in war, so to speak.

But this viewpoint overlooks the fact that “paper money” is an asset that has an strongly-estimable value in the future, just as much as real estate. And that means it can be borrowed against. The way the world works, and the laws of increasing returns being what they are, a guy like Elon Musk can just ask the nearest national bank for several hundred million dollars in cash, pay essentially nothing for the service, and all he would need to do is throw a stack at the armored car company to deliver it to his house, where he could fill up the pool in the back yard with the bills, and dive into it like Scrooge McDuck.

I mean, heck, I could do it, if I had a some short term need. I’m not going to get even Ms. Dugan’s rate, let alone Musk’s, but I could do it. I could borrow money against my portfolio, and use the money to pay for something like… college tuition. Oh, crap. This is probably a better option than actually dipping into the asset, huh?

Warren on our Corporatocracy

I’ve been talking about corporate charters for a long time now, and people either don’t understand what I’m talking about, or think I’m crazy. We give people a charter to create a company, which grants them special, legal protections to build the business. But that charter implies a social contract that they will not abuse the public trust, in exchange for that special treatment.

This has been a sort of gentleman’s agreement, that corporations — as legal “people” in the campaign finance definition — would be good “citizens.” In modern America, many simply haven’t been, and it’s time to hold them accountable, and make them give back to society in a more equitable way. Global-spanning companies shouldn’t be allowed to continue to “socialize the costs, and privatize the profits.”

Just yesterday, Mark Benioff, CEO of Salesforce, wrote an op-ed in the Times saying much the same thing:

“To my fellow business leaders and billionaires, I say that we can no longer wash our hands of our responsibility for what people do with our products. Yes, profits are important, but so is society. And if our quest for greater profits leaves our world worse off than before, all we will have taught our children is the power of greed.

It’s time for a new capitalism — a more fair, equal and sustainable capitalism that actually works for everyone and where businesses, including tech companies, don’t just take from society but truly give back and have a positive impact.”

These people face perhaps the toughest uphill climb possible. The world of corporate governance is a private club, where executives of one huge, public company might sit on the boards of a dozen others, all interconnected. They’re used to getting their way, because, in aggregate, they use their money to influence local, state, and federal governments, to make things easier on themselves, and tougher on their competitors. They aren’t going to care for someone kicking over the castles in their sandbox.