Why taxing billionaires isn't a solution

Tim Turner at The American Thinker has a piece titled The Scrooge McDuck Myth.  This myth, which could also be called the "Richie Rich Myth", paints the super-rich as having bins of money, into which they can stick their hands and pull out arbitrary amounts as needed.  This myth is imbibed throughout childhood, decanted from comic books and Saturday morning cartoons.

The truth is actually more complicated, and less satisfying.  Billionaires keep their fortunes in stock.  Each share of stock is a certificate of ownership of a piece of a corporation. 

You can increase the tax for billionaires, and in order to pay those taxes, billionaires can sell stock.  But there is a side-effect:

But wait, you say, the billionaire doesn't pay taxes in stock, they pay them in dollars.  And yes, you are right.  They do pay in dollars.  Considering how much money a billionaire has on hand (as we've just discussed), where do you think they get that money?  From selling stock.  And when we tax all of the billionaires, they all sell their stock at once.  No other billionaires are waiting to buy.  The price drops in order to get someone, anyone, to buy. No longer able to tap capital markets, the company may sell off its wealth-making equipment to pay its bills.  People are fired. 

 

The truth is there isn't that much money to skim off, any more than your can skim off the top of your house.  Companies and billionaires are valued by assets, not piles of cash.  And some wonder why the Dow Jones is dropping every time an Obama cabinet member announces a new plan to tax-and-spend our seed corn.