When the State Can’t Legally Steal Your Wealth They Simply Make New Taxes

I’m sure you’ve heard that Mark Zuckerberg is in a position to make an absolute fortune with Facebook’s upcoming IPO. What You probably haven’t heard is that the state is looking to enact a new tax because without it they can’t legally steal as much of Zuckerberg’s newfound wealth:

WHEN Facebook goes public later this year, Mark Zuckerberg plans to exercise stock options worth $5 billion of the $28 billion that his ownership stake will be worth. The $5 billion he will receive upon exercising those options will be treated as salary, and Mr. Zuckerberg will have a tax bill of more than $2 billion, quite possibly making him the largest taxpayer in history. He is expected to sell enough stock to pay his tax.

But how much income tax will Mr. Zuckerberg pay on the rest of his stock that he won’t immediately sell? He need not pay any. Instead, he can simply use his stock as collateral to borrow against his tremendous wealth and avoid all tax.


A drastic change is necessary to fix this fundamental flaw in our tax system and finally require people like Warren E. Buffett, Mr. Ellison and others to pay at least a little income tax on their unsold shares. The fix is called mark-to-market taxation.

For individuals and married couples who earn, say, more than $2.2 million in income, or own $5.7 million or more in publicly traded securities (representing the top 0.1 percent of families), the appreciation in their publicly traded stock and securities would be “marked to market” and taxed annually as if they had sold their positions at year’s end, regardless of whether the securities were actually sold. The tax could be imposed at long-term capital gains rates so tax rates would stay as they were.

We could call this tax the “Zuckerberg tax.” Under it, Mr. Zuckerberg would owe an additional $3.45 billion when Facebook went public (that’s 15 percent of the value of the roughly $23 billion of stock he owns). He could sell some shares to pay the tax (and would be left with over $20 billion of Facebook stock after tax), or borrow to pay the tax.

Under current tax laws Zuckerberg would actually be allowed to keep the fruits of his labor, something that sate never approves of. The state is like a far more vicious version of the mafia, if you make any money they want a cut and if you don’t give them that cut something bad is going to happen to you. Unlike the mafia, the state pretendes to abide by a series of laws and regulations but in truth these laws and rules are entirely under their control and therefore can be changed whenever they become inconvenient.

Like most state puppets the author of this opinion piece is trying to make the market-to-market tax appear to be a great idea by appealing to the reader’s jealousy. First the author states that Zuckerberg is in a position to make a great deal of money, the reader. The author then moves on to explain that, unlike the reader, Zuckerberg will be able to avoid a great deal of taxation when he obtains his new wealth. He finally closes by saying the new market-to-market tax will allow the state to gouge Zuckerberg without affect the reader. Therefore most people reading this article will likely walk away thinking the market-to-market tax is a great thing as it punishes people who are more successful than themselves.

What’s interesting is looking back at the passage of the Sixteenth Amendment of the United States Constitution, which gave the federal government the authority to collect income tax. Before passage of the amendment the Wilson-Gorman Tariff Act established a 2% federal income tax but was shut down by the Supreme Court when they ruled such income tax as unconstitutional in Pollock v. Farmer’s Loan and Trust Company. Such a ruling was a mere technicality for the state as they were able to simply make an amendment to the Constitution that allowed the collection of income tax by the federal government. Shortly after the passage of the Sixteenth Amendment the Revenue Act of 1913, which established the federal income tax, was passed.

The Revenue Act of 1913 passed with little objection by the population because less than one percent had to pay federal income tax. From there the state simply kept ratcheting up the income tax rate until a large majority of the population were paying. Like the market-to-market tax being proposed in the New York Times article, the Revenue Act of 1913 was able to pass by preying on people’s jealousy. Looking at the history of the federal income tax should also make people aware of the fact that any newly passed tax, such as the market-to-market tax, will eventually affect a vast majority of the population.

According to the author the market-to-market tax will have a positive effect:

The most profound effect of a mark-to-market tax would be to level the playing field between wage earners, on one hand, and founders and investors on the other. Superwealthy holders of publicly traded securities could no longer escape tax on their vast wealth.

The author’s conclusion is entirely wrong. A market-to-market tax will further encourage those who have a million dollar idea to flee to a friendlier country where they won’t be subjected to as much theft. In this age of global commerce why create something amazing in the United States when you can do it in Hong Kong and keep far more of the wealth you generate? Facebook it a website and like any website it can be setup anywhere in the world. Setting aside the fact that taxation is theft still makes the idea of a market-to-market tax a bad idea.

Yet agents of the state will feed it to the people by preying on their jealousy, meaning the tax will likely enjoy a great deal of support by the populace. Unfortunately for the populace, especially those of us who aren’t wealthy enough to be effected by this new market-to-market tax, we will eventually become targets of this new tax as well.