There is a lot of literature on this. In the US, 2/3 of wealth is non-liquid so any attempt to price it is fiction. Of the 1/3 that is liquid, most is not realizable. Tax policy is effectively restricted to the liquid, realizable fraction, which is such a small percentage of the total that even modest-sounding percentages are a large percentage of what is practically taxable. Governments know this.

An overlooked issue in popular discourse is that notional asset values are tightly coupled to who owns them — it isn’t transferable. Concepts like “dead equity” have been in the finance literature for a very long time. Elon Musk’s equity only has the value it does because he owns it. He couldn’t convert it into cash even if he wanted to.

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pydry a day ago | parent [-]

>Tax policy is effectively restricted to the liquid, realizable fraction

no it isnt. illiquid doesnt mean unpriceable and illiquid doesnt mean can't be liquidated. people liquidate their illiquid assets all the time to pay their tax bills.

it being "complex to collect" is a criticism of many taxes which are already being paid. sales tax and VAT are horrendously complicated (far more so than a wealth tax) to collect but we still do it.

>An overlooked issue in popular discourse is that notional asset values are tightly coupled to who owns them — it isn’t transferable. Concepts like “dead equity” have been in the finance literature for a very long time. Elon Musk’s equity only has the value it does because he owns it

even if it were true, it's not a good reason not to tax him.

in fact, it might even help bring some sanity to the capital markets if he and every other billionaire were forced to price their illiquid assets for tax purposes.

theres no efficiency or impossibility argument that prevents this. the only argument boils down to stamping one's feet declaring that it's not fair (that I would have to value my illiquid assets and might be forced to sell them if I underpriced them).

> He couldn’t convert it into cash even if he wanted to.

Elon musk has been converting his assets into cash recently and he has had no problem doing it.

Bill Gates similarly liquidated his assets to fund his charity and didnt have a problem doing that.

Why is liquidating their shareholdings suddenly a problem only when they need to pay taxes?

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philipallstar 19 hours ago | parent [-]

> Why is liquidating their shareholdings suddenly a problem only when they need to pay taxes?

It's not, and I don't think anyone said it was.

The problem is in the calculation of "net worth". And, more importantly, the difference is that people choosing to put their money into something is not the same as enabling it to be taken by force.

	▲	pydry 17 hours ago \| parent [-]
		>It's not, and I don't think anyone said it was. Yeah you did. You wrote "he couldnt turn it [his illiquid assets] into cash even if he wanted to". >The problem is in the calculation of "net worth". That is not a problem. Let them value their own assets. If they value their ming vase at $10k then the government reserves the right to buy it for...$10k. They might get away with avoiding paying taxes. Or the government might get a bargain. The incentive, though, is to be scrupulously honest and accurate. Some people obviously wouldn't like being put in such a position. > And, more importantly, the difference is that people choosing to put their money into something is not the same as enabling it to be taken by force. Im not 100% sure but I think this falls under the category of just saying "wealth taxes not fair!"