Tesla Stock Slide Shows Perils of Wealth Tax
Plus, Yale Law hires Hillsdale grad who clerked for Alito “during Dobbs year”
The big business news of the day is Tesla’s announcement that its deliveries were down for the first quarter of 2024. When I checked late morning, TSLA stock was down about 6 percent, or $10.40. Tesla CEO Elon Musk in February 2024 disclosed owning about 715 million shares, or 20.5 percent of the company, which means the morning’s decline sent the market value of his stake down by about $7.4 billion.
In related news, Forbes released its “Billionaires 2024” package, listing Musk as the world’s second richest person and the richest American, with net worth of $195 billion. (That calculation preceded today’s slide.) Forbes reports, “Musk is a long way from November 2021, when he became the first person ever worth $300 billion.”
Even if you take the Forbes calculations with a pile of salt, what are the implications of the decline to $195 billion from $300 billion, the idea that the richest man in America is $105 billion less rich than he was in 2021?
It’s a reminder that the biggest fortunes are often built by accepting levels of risk and volatility that many individuals find difficult to tolerate.
It’s also a reminder of the practical difficulty of taxing unrealized capital gains on an annual basis. In March 2022, when Biden floated a revised version of what I called the Biden-Wyden wealth tax, I warned of “practical issues having to do with the valuation of assets whose worth may fluctuate wildly over time.”
This is still a live policy issue. Here’s how a March 27, 2024 Washington Post news article by Julie Zauzmer Weil describes Biden’s latest, presidential election year budget proposal: “Biden proposes to raise $503 billion over the next decade by imposing a 25 percent tax on people who claim more than $100 million in assets — a source of wealth that has long been beyond the reach of the IRS. The new levy would be assessed not just on annual income but on the annual increase in the value of their holdings, including stocks and real estate, even if that additional value was not realized because those assets were not sold.”
Imagine if Musk had to pay $25 billion to the IRS as the Tesla stock made its way upward. It’s not clear that the Biden-Wyden proposal would let him declare losses on the way downward. If it doesn’t, it’s asymmetrical; entrepreneurs get taxed on unrealized gains but not on unrealized losses. Senator Wyden, who chairs the Finance Committee, issued a document requesting comments on questions including “what limitations should be placed on mark-to-market losses.”
If taxpayers can declare the unrealized losses and use them to reap refunds or offset gains looking back to prior years, it creates a significant ongoing budget obligation for the federal government. Where does the $25 billion come from, in the federal budget, to reimburse Musk in 2024 for the money he paid the government back in 2021 for the run-up in Tesla stock? From the owners of Trump Media and Technology Group, with its new $6 billion market capitalization? From the owners of various artificial intelligence shares with high valuations that may or may not last? In the event of a widespread, broad-based stock market downturn, the U.S. Treasury might be left standing in the game of unrealized-capital-gains musical chairs. It’s the sort of risk Musk might be willing to accept, but it’s a heck of a way to finance national security, a healthcare safety net, or other federal government programs.
Yale Law School’s Hillsdale College hire: Grim news about stifling ideological conformity and attendant antisemitism in higher education is almost everywhere these days, so when there’s something that suggests a possible movement in the other direction, it is worth paying some attention to.
Yale Law School announced that Garrett West, a 2015 graduate of Hillsdale College and a 2018 J.D. from Yale Law, “will be joining the Yale Law School faculty as an Associate Professor of Law on July 1, 2024.”
From the press release:
“Garrett has produced an astonishing amount of insightful scholarship while working full-time as a lawyer, and every paper showcases his creativity and brilliance,” said Dean Heather K. Gerken. “His presence on the faculty will enrich our conversation and enhance our intellectual life.” …
After law school, West clerked for Judge Diarmuid F. O’Scannlain of the U.S. Court of Appeals for the Ninth Circuit, Judge Thomas B. Griffith of the U.S. Court of Appeals for the D.C. Circuit, and Justice Samuel Alito ’75 of the U.S. Supreme Court.
Ed Whelan of the Ethics and Public Policy Center posted on X, “Very promising sign that Yale Law is making a commitment to intellectual diversity. West clerked for Alito during Dobbs year and has strong conservative credentials.”
If Yale students, and the other faculty members, can stomach a professor who clerked for Alito during the year of the Dobbs decision that overturned Roe v. Wade, it’ll be quite something, especially given how deep Roe’s roots run in New Haven via Griswold v. Connecticut, which was a Yale Law project from beginning to end.
It’s always hard to call a bottom on Ivy League wokeness—William F. Buckley Jr. was complaining about it as far back as “God and Man at Yale,” which came out in 1951. But how West fares at Yale, and if he’s a token outlier or eventually attracts a cluster of conservatives to the school that was once home to Professor Robert Bork, will be worth watching.
Baltimore bridge: One of the skills of a top-tier opinion journalist is the ability to find an angle on big breaking news, even if it’s the sort of issue, like “freight ship accidentally collides into a bridge,” that doesn’t necessarily seem ideological or political.
In today’s New York Times, Paul Krugman has a column headlined “Will MAGA Republicans Block Baltimore’s Rebuilding,” claiming that “reflexive opposition to government spending in general, no matter how obvious the need,” will slow the bridge rebuild.
Elsewhere on the same opinion page, Bret Stephens predicts that what will really gum things up are environmental reviews. “Red tape means not enough projects get off the ground or completed in a timely way.” Stephens says in one of his regular conversations with Gail Collins. “The regulations that are often the most absurd, burdensome and time-consuming are, I’m sorry to say, environmental. Let’s protect people and care less about, say, fish — the kind of concern that did so much to hold up the rebuilding and drive up the costs of the Tappan Zee (now Mario Cuomo) Bridge over the Hudson.”
makes some similar points at Bloomberg, writing, “A good way to start laying the groundwork would be to insist that a years-long planning process is not acceptable.”The idea that the big problem in Washington is a reluctance to spend federal money is a Krugman classic; in fact, Washington has been spending with abandon.
If the bridge-rebuilding would happen as rapidly as the opinion-commentating, before you know it the Baltimore traffic will be moving fast as a Jim Palmer fastball.