Would Mark Zuckerberg get a refund on his wealth tax bill?
Easy come, easy go. Yesterday, an internal technical issue took Facebook, Messenger, Whatsapp and Instagram offline for six hours starting around 10 a.m. CT. Suddenly, if you wanted to know what that person you didn’t really like much in school and haven’t seen since graduation had for lunch, you had to actually speak to them.
But if you think you had it bad, spare a thought for Facebook’s founder Mark Zuckerberg. As Facebook shares plummeted in response to the outage, the business website Fortune’s tracking software estimates that he lost an estimated $6 billion from his personal fortune. This illustrate one of the many difficulties of ‘wealth taxes’ — wealth can be very volatile.
Senator Elizabeth Warren is leading the push for a wealth tax. She claims:
Households would pay an annual 2% tax on every dollar of net worth above $50 million and a 6% tax on every dollar of net worth above $1 billion.
But how do we know how much someone is worth? Mark Zuckerberg’s wealth is largely composed of shares in Facebook and we calculate his wealth or net worth by looking at the market value of those shares and multiplying that by the number of shares he holds.
There are a number of problems with this. First, having lots of assets doesn’t necessarily mean you have lots of cash, and it is cash you need to pay taxes. Second, if you sell lots of your assets to get the cash, the market value of those assets will fall. And, as yesterday shows, there is a further problem: the market value of those shares can change very rapidly. Mark Zuckerberg’s wealth or net worth fell by five percent in a few hours.
I am no particular fan of Mark Zuckerberg. But there is a reason that countries around the world have abandoned wealth taxes such as that proposed by Sen. Warren: they just don’t work.