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Policy

How to Introduce a Wealth Tax

In the last few weeks there has been an intense string of discussions in Silicon Valley about the future of taxation. The debate has primarily sprung from Elizabeth Warren’s comments about adding a wealth tax, and Alexandria Ocasio-Cortez's comments about a 70% marginal tax rate.

There is high engagement around these issues in Silicon Valley for a few reasons. First, people in the Valley are very conscious of the difference between entrepreneurs who are compensated and build wealth through equity appreciation versus employees who are compensated in cash and closer-to-cash instruments like RSUs. It is lost on no one here that the wealthiest entrepreneurs with appreciated stock generate little to no income and are able to broadly avoid taxation with extremely low-interest loans to finance their consumption, where otherwise well-off wage-earners are footing large tax bills.

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The problem currently with any wealth tax concept is that most assets don’t have a clearly established market value.