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I read this article on MarketWatch where they outline Elizabeth Warren's plan to tax the wealthy:

  • 2% tax on every dollar above $50 million in assets
  • 6% tax on households crossing the $1 billion threshold

In a Twitter discussion between Mark Cuban and Jason, they suggest that the effects of these taxes will cause an annual market/asset liquidation and discuss how it may affect the overall market.

What are the mechanics they are talking about? Why would one need to liquidate their market assets because of taxes?

D Stanley
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KingsInnerSoul
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1 Answers1

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Most "billionaires" have their wealth in companies that they grew into multi-billion dollar entities that they own a significant portion of. If the government then says "you own too much - you must give us 6% of what you own", then they likely don't have enough liquid assets (cash) to pay that bill, so they will be forced to sell shares of that company (or give them to the government, which may result in state ownership which is a whole other pickle).

That amount of forced selling artificially increases liquidity and would drop the market price of the shares since the seller would be highly motivated, and buyers can be price "takers".

And that's just for public companies. With private companies, liquidity is much lower, so a forced sale could be very traumatic for private owners who might have to sell their ownership for much less that what they're truly worth (and possibly give up control in the process).

D Stanley
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