hi everyone this is charles hoskinson broadcasting live from warm sunny colorado uh real quickly i wanted to make a video about some upcoming tax policy uh because there's a new presidential administration one of the highest priorities this administration has above and beyond the coronavirus response is to update our tax system in the united states so this is a u.s centric video although it does have some global considerations unfortunately there are two ideas that are kind of lingering around that go above and beyond the common set of ideas that are usually fought about so usually we fight in america about the income rates so what's the top tax rates and then we fight about exemptions and deductions and then whether you know capital gains should be a certain thing or that and that's a normal yearly dec every decade type of thing and if republicans they go lower democrats they tend to go higher for certain people and that's not what this is about there are two tax policies in particular that are new and never been done before in the united states that could be catastrophic to the cryptocurrency industry into the entire startup industry of america and i wanted to bring them to everyone's attention and if they survive committee and they actually get to a point where people are thinking about voting on it i would love for people to write their congressman and and please express extraordinary uh dislike and uh anger over it first off uh there's this idea of a wealth tax so the basic concept of a wealth tax is that the government somehow some way will be able to assess how much you're worth who knows how but they'll take a look at all your assets uh liquid and illiquid tangible and intangible form them together put a price tag on your head and if you happen to be worth too much money they'll just simply say okay every year we're just going to tax you at some rate a few percentage points or something like that regardless if you made any money at all you could be in prison and have no earning potential at all but still get a tax bill every single year if you happen to be worth too much i believe this is theft at the highest level because the whole point of taxation is the government is the regulator of the markets and ensures fair commerce so they're giving us a surcharge to that the concept that just as a condition of breathing every year the government can just come and take money from us because they think that we have too much is an incredibly dangerous and very damaging situation the other thing is that any person who's high net wealth will just simply not reside in the united states or offshore all of their assets to ensure that they don't get captured in this regime so it's neither productive nor in practice will it be effective and what it's going to do is create a huge offshore industry specifically to hide assets abroad because people simply won't comply furthermore it's not clear how forensic accountants are going to be able to value these things how much is that art worth how much is your company worth how much is your house worth these maybe we can get it for a market value but what if there's no price signal for that and you disagree with the government about valuation it's going to create an army evaluation fights over every single illiquid or rare asset that exists hugely problematic and unfortunately this is something that's being heavily pushed in that's political circle the more damaging to startups is this concept of taxing unrealized capital gains it absolutely blew me away that the treasury secretary nominee janet yellen apparently says she's going to consider it and this is actually being taken seriously it's a joke it's an absolute joke and we need to understand what taxing unrealized gains means let's say you're an entrepreneur and you start a business and you have very little capital and you go and get some investors in that business so they go and put some money in and you suddenly have a valuation so that worthless stock that you have now let's say has a 5 million or 10 million dollar valuation most startups at that valuation have no assets uh they they have not a lot of capital you're probably a poor entrepreneur you have no means to do anything but you may own 70 of that company so you've had an unrealized capital gain of millions of dollars and so at the end of the year the irs will say well you've just had an unrealized capital gain of uh let's say seven million dollars because you own seventy percent of that company valued at ten million what went from nothing to ten million in valuation here's your tax bill please pay us two million dollars where do you get the money for there's no market for your stock it's completely illiquid you have no money because you're a poor entrepreneur who's just starting something and building something but you've just been taxed two million dollars for an unrealized capital gain any asset let's say uh you happen to discover that one of the paintings in your attic uh that you've just acquired not too long ago at a garage sale is now worth 50 million dollars because it's a long lost picasso the irs will say oh well uh you bought it at five dollars and now it's worth 50 million dollars even though you haven't sold it you haven't even tried to sell it uh you don't even know if it's actually worth 50 million dollars we're still going to send you a tax bill for 10 million dollars here you go good luck how is that not theft it's an extraordinary thing and it's going to destroy the entire startup culture of america if such a thing gets pushed through in relation to the crypto markets many of you likely have extraordinary because of the recent bull markets capital gains so let's say that you invested in a small cap cryptocurrency that doesn't have a lot of liquidity and that cryptocurrency goes up a hundred x by the end of the year but it has very little trading volume the irs will say well congratulations uh you got a 100x roi so here's your tax bill and then it collapses the very next day 90 you will still be taxed as if you got a 100x capital gain even though you didn't realize it think about that this is literally what is being proposed taxing unrealized capital gains you might ask well what happens if it goes in the opposite direction and the markets collapse do i get a credit or something no so i think these are among the two most dangerous tax ideas who cares about the rates they go up they go down you know you just deal with it you optimize it uh you pay your fair share whatever okay that's a debate and we should have that debate about what the top rates should be a wealth tax is a massive invasion of privacy because it means every single thing you own you must declare to the government every single thing you own the government must decide how much that's worth and if you have too much the government will just simply send you a bill every year regardless if you lost money or made money and the taxing of unrealized capital gains means that no one can be an entrepreneur anymore unless they're independently wealthy and can afford to pay millions of dollars in taxes as their company increases in valuation look up the number of companies that are under a 25 million valuation that have failed over the last 10 years in silicon valley it's over 90 percent but every single one of those the people who founded those companies would get a multi-million dollar tax bill for starting them even though they failed and made no money whatsoever you tell me if that's a fair tax system it's horrific and it absolutely is malpractice at the highest levels of the economy for people to even entertain these ideas and i truly hope that they die before they're brought for a vote one of the reasons i was very hopeful that georgia would at least have one republican elected was that it would end any discussion of these two ideas they could not pass but because the senate has balance power now was 50 50 and harris has the deciding vote there's an actual possibility now that these two ideas could actually reach a vote and be decided on a 50 50 split if that happens please get politically involved if you're an american i very rarely ask people to get involved in things but this effectively shuts my country down for business it will end the entire startup community and it will devastate everybody's financial privacy and an army of accountants will now be employed by the irs to decide how much everybody has and you have zero privacy about the things you own you must declare every single asset to the irs that's not america that's not sensible policy in any sense of the word and if it gets that far i'll give you guys some links for how to contact your congressman or senator and there absolutely needs to be a push back on this this is already two days into this administration an extraordinary overreach and it's just sad and disgusting no health tax no tax on unrealized capital gains we can't go that far let's debate the rates fine whatever it happens you know obama one way clinton one way bush another way trump another way who cares that always is a fact of life we deal with it every day these we don't and these will destroy the country's economic base if we do it thanks for listening
