Without getting into the other parts of the plan, an obvious unintended consequence of this bill would be that private companies will delay IPOs even longer, since the moment they IPO, founders with more than $1b in equity will have to immediately pay retroactive taxes on their wealth, even if they don’t sell.
Companies are already delaying IPOs much longer, likely because of the huge regulatory burden of being public (exacerbated by Sarbanes-Oxley - another unintended consequence). Why does this matter? Because public companies are easy for individual investors to hold, directly or via mutual funds, and so appreciation in the value of public equities is distributed widely, including to the middle class in retirement accounts and pension funds.
Private companies can only be held by millionaires (accredited investors). Companies that delay going public raise capital via private transactions with private equity funds like SoftBank & Tiger, whose investors are far more tilted to wealthy individuals and countries (ie Middle East Sovereign Wealth Funds). Apple, the largest company in the world, did almost all of its appreciation on public markets, spreading the wealth. Companies used to IPO at sub $1b valuations, now the companies with the most future growth potential like Facebook wait until they are worth tens of billions.
So even if the direct effect is to tax the most wealthy, the indirect effect is to prevent the average American from sharing in startup gains.
Pension funds are an important exception here, because they can invest in the private equity funds - or even directly in decacorn private companies. However, I’m very bearish on pensions, and think it’s quite harmful if more retirement money moves from private accounts like 401ks into defined benefit pensions. The reason is simple: investment returns have high variance, even over decades, and have been steadily decreasing for millennia. As a result, it is impossible to produce past returns today, and there will always be bubbles and crashes such that some funds will underperform long term averages.
The result is that the vast majority of pension funds are underfunded because they want to promise higher benefits than they can actually guarantee and when they do so the negative consequences are decades in the future. When the people who set up the unsustainable promises may be long gone. The result is a ticking time bomb of underfunded pensions across the world. Private accounts where individuals’ retirement savings vary depending on the market returns provide less security, but reflect the underlying and unavoidable realities of uncertain returns.
Those who want guaranteed returns can purchase annuities which are sort of like defined benefit pensions except they are actually regulated correctly, and can’t promise more than they will be able to pay. They return less than pensions currently promise because, well, they are actually promising something that is possible. And unlike pensions they make smart compromises like guaranteeing a certain low return, but then paying you extra if investment returns were high during that period.