Watch Out for the Wealth Tax!

“If the wealth tax passes, go out and buy yourself some gold because people are going to rush to find ways of hiding their wealth.”

That’s the advice form Leon Coopeman,  It doesn’t matter to him that much if the government takes away rich people’s money, because he already has plans to give his fortune away.

But it matters to the country.  “I’m a better capital allocator than the U.S. government,” says Cooperman.

That’s true.  Investors are determined to find productive places to put their money.  They aren’t always successful, but they want to earn a return, so they need to find opportunities that generate more wealth.  

Politicians, on the other hand, are generally looking to buy votes.  The money they get their hands on goes straight to consumption. 

But production precedes consumption.  Consumption is totally dependent on somebody first producing something. 

C.ooperman is a billionaire hedge fund manager.  His fund, Omega Advisors, didn’t make money for its clients, or make Cooperman rich, by consuming the money they placed with Omega.  They had to find way to make it productive.

Individuals are always better allocators of wealth than governments.  

Now Elizabeth Warren and Bernie Sanders are pushing a new wealth tax that would levy a tax of two or three percent on the very biggest fortunes in the country.  

That’s how socialism gets a foot in the door.  It promotes policies designed to “get the rich.”  But they end up getting everybody.  Ever heard the phrase “bracket creep”?  It referred to the way that years of inflation pushed people into higher and higher tax brackets on phantom increases in their real income.  Soon the middle class were paying tax rates that were designed to get the rich.

Since a wealth tax taxes existing capital, not income, the subjects of a wealth tax would have to pay it out of their current income.  That means less total investment out of current income year after year; or if their current income is not sufficient to pay the wealth tax, it means the liquidation of some of their capital year after year to meet the tax bill.  In either case it means less investment capital.

Socialists love the smell of class warfare in the morning.  But their victims do not.  So, face it, many of the wealthy will just pack up and leave.  Taking their wealth with them.  Leaving America less well capitalized.  

Cooperman says, “We’ve got to decide whether we’re a capitalist nation or a socialist nation.”  Look at the people in the Biden administration.  Look at congress.  It is clear that we are headed down socialism’s desolation road.

We have described gold before as capital on strike.  Cooperman says, “If the wealth tax passes, go out and buy yourself some gold because people are going to rush to find ways of hiding their wealth.”

But it is not just the wealth tax.  The more socialism we get, the more people are going to buy gold to protect themselves and their hard-earned money.  

You shouldn’t wait for the wealth tax.