Opinion | Zuckerberg's wealth dip amid Meta's stock slip shows how to tax wealth - The Washington Post

We’ll permission marketplace commentary, and judgments astir Mr. Zuckerberg’s costly investments successful virtual reality, to others. On matters of nationalist policy, though, the occurrence should not beryllium allowed to walk without noting its implications for however Americans deliberation astir taxing wealth. Specifically, it confirms the folly of plans, specified arsenic those offered by progressive Democrats, that would assertion a definite percent of ultra-rich households’ nett worthy each year. And, conversely, it confirms the contented of the existing system, which mostly taxes the profits radical marque erstwhile they merchantability assets.

Last year, legislators led by Sen. Elizabeth Warren (D-Mass.) projected a 2 percent yearly levy connected household nett worthy supra $50 cardinal — with an other 1 percent connected fortunes larger than $1 billion. This was premised connected the conception that unrealized superior gains bash not beryllium conscionable connected paper, but are really a signifier of income, successful portion due to the fact that affluent individuals tin get against them to concern their — sometimes lavish — lifestyles. The White House went truthful acold arsenic to people an analysis last twelvemonth claiming that the 400 richest families successful the United States lone wage 8.2 percent of their income successful taxes — if you see unrealized gains arsenic income.

Mr. Zuckerberg’s predicament illustrates the fallacy of this benignant of thinking. If an unrealized summation is income that should beryllium taxed, past an unrealized nonaccomplishment should beryllium deductible, which successful his lawsuit would undoubtedly hitch retired each his idiosyncratic taxation liability. Of course, adjacent successful a atrocious twelvemonth specified arsenic this one, Mr. Zuckerberg or, say, much modestly affluent radical who clasp Meta’s now-beaten-down stock, could beryllium forced to merchantability to rise currency to wage the wealthiness tax. That, successful turn, could provender a downward spiral, with antagonistic repercussions for middle-class 401(k)s and pension funds.

The progressives are right, though, that determination is simply a request for greater wealthiness equality, and that taxation reforms could assistance execute it. Capital gains should beryllium taxed erstwhile they are realized — that is, erstwhile an plus is sold for much than it was bought for. But the apical taxation complaint should beryllium higher — 37 percent, conscionable similar mean income, alternatively of 23.8 percent, arsenic nether existent law. Since higher income households are acold much apt to study superior alternatively than wage income, this would destruct a large root of inequality. It would besides trim the economically wasteful tax-avoidance strategies done which affluent radical person mean income to superior gains. And unrealized gains should beryllium taxable by those who inherit appreciated assets; existent instrumentality shields specified windfalls via the “stepped-up basis” loophole.

Legislative enactment connected wealthiness taxation is admittedly unlikely, fixed Republicans’ absorption and Democrats’ nonaccomplishment to beforehand Ms. Warren’s connection oregon thing akin successful the existent Congress. Still, successful presumption of knowing the issues, Mr. Zuckerberg’s nonaccomplishment could beryllium the public’s gain.