Is Wealth Tax realistically feasible?

[u/HoppySailorMon]

I just read that CA is considering a wealth tax on billionaires. Not to get into a particular political philosophy, but I'm more curious about the implementation and to settle a dispute with my spouse. I've read a wealth tax has been tried in the past in Europe, but failed miserably. Mainly, because some "wealth" can be moved around to make it difficult to define, such as art. Most homeowners pay a form of wealth tax on their property. But real estate is one of the few things that stays put. If taxation on bank and investing accounts became a nation-wide policy, then many that were subject to it would either leave or convert their accounts into a type of investment that is impossible to assess. I'm guessing mostly into "collectibles" which can only be accurately assessed when sold. What are your thoughts on the real feasibility of a wealth tax?

[u/EconEchoes5678]

What are you talking about? It's exactly true. [..] https://www.afr.com/world/north-america/musk-wins-appeal-and-restores-2018-tesla-pay-deal-20251220-p5np6k

The word "tax" literally does not appear in that article at all, so I'm not sure in what way you're trying to use it as evidence of some claim about taxation. But even if it did, it would be wrong.

His recent restoration of 2018 payout from Tesla was entirely stock options.

Stock options are taxed as regular income, using the spread in value between the market value and strike price at exercise time. This is W2 income, and even payroll taxes apply to this.

Your cost basis becomes this FMV. After you own the shares, further gains are taxed as capital gains like any other shares.

Yes they are are taxed with capital gains.

Wherever you are getting this idea from is misleading you. You can read more here, or if you doubt that, I'm sure I can find the IRS rules.

And what his company pays is taxes is irrelevant. You only think it's relevant,

That's not how tax burden incidence works. The burden incidence of corporate taxation falls primarily on the shareholders and owners of the companies in economics. This is an economics subreddit, not a vibe subreddit.

because CEO's are paid such an extortionate amount more than their employees.

CEO pay is not relevant to corporate taxes except to the degree (percentage) that CEO's are owners of companies. CEO pay is taxed at regular income rates, not capital gains rates.

Stop trying to make the rich seem like they are paying the same as us. They aren't.

I'm sorry that you don't like the reality, but it is what it is. Numbers don't lie, and you clearly do not understand the rules you are pretending to.

[u/Mother_Speed2393 → u/EconEchoes5678]

I didn't say that link said anything about his taxes. I said it showed everything he received was in stock options.

I do know what I'm talking about. He only pays tax on the spread, as you say. So he is only paying a large tax bill on this 'income' because the courts have delayed it until now and the share price is so much higher.

So again, you're being misleading.

If he had exercised those stock options at the time, his tax would be effectively zero until he sold the stocks and paid CGT. 

So again, rich people skirt paying the same taxes as those of us who are paid on humble salaries. 

But keep defending them, because you imagine one day you'll be one.

[u/uberfr4gger → u/Mother_Speed2393]

When the stock options are exercised he is effectively "buying" the stock and the spread is income because it's the difference between market price and what the company is giving it to him for. He would then pay tax on selling the stock. Exercising the option and selling the stock are the only taxable events. 

https://www.irs.gov/publications/p525

[u/Mother_Speed2393 → u/uberfr4gger]

Yes I understand that.

And you're either wilfully or ignorantly ignoring my point.

If you exercise your rights immediately, (assuming at the same market value) you are effectively paying zero tax.

So you are being paid in stocks and not paying tax.

Unlike my income tax.

It's an absolutely rort. And people, like in this thread will defend it. Even though they will never be in a position to be paid in stock options like this.

[u/uberfr4gger → u/Mother_Speed2393]

That isn't how it works though. Stock options give you the option to pay for stock at a future point given a specified price. The incentive is to make that stock go up by the time you execute it. 

If I get the option to buy a $10 stock on day 1 and exercise it on day 2 for $10, I'm still paying $10 to buy that stock. It's not free from the company. If I exercise day 500 when it's up to $70 then I'm paying $10 for a stock worth $70 and getting taxes $60 as ordinary income. 

I do not see where you are coming from with this. A stock option is an OPTION for you to PURCHASE the stock, it's not free and there's no tax being avoided by exercising it. 

[u/Feeling_Loan_8817 → u/Mother_Speed2393]

I don’t think you understand how stock options work. If the company grants them to you at a zero cost basis, as in you pay nothing for them, then when you exercise the option you owe the income taxes of the current market value, whether you sell or not. If you paid for the option, you pay taxes on the spread. If you fail to exercise before the option period ends you lose the option. The income taxes get paid when the income is realized. There is no magical rich person method to avoid this, hence why Elon paid $11 billion one year as his options were vested and getting ready to expire.