Recap: Wealth is the sum of all assets, minus liabilities and debt. Assets are specific items of value one owns. Liquid assets are cash or “cash-equivalents” - items easily converted into cash without significant loss of value - such as bank accounts, money market funds and stocks (less so for stocks owned by billionaires – see explanation below).
Illiquid assets are investments or properties that cannot be quickly converted into cash without a significant loss in value or a lengthy, complex selling process. Examples of illiquid assets include real estate, private equity, venture capital, collectible art, and restricted securities*. Selling Illiquid assets quickly is hard because these assets rarely have a ready pool of buyers and would likely require slashing prices, leading to substantial financial loss.
So where would billionaires get the cash to pay a wealth tax? Mostly from their liquid assets, which comprise around 31% or their asset holdings, on average (Altrata, 2024, Cato Institute, 2025). See Post I of this series for more details.
Method: I’m ultimately interested in how a billionaire wealth tax would impact the US economy and American people. To answer that question, even tentatively, requires answering a lot of other questions. My method will be to ask AI a question, review AI sources to confirm accuracy of response, and then tweak the AI summary for brevity, neutrality and relevance, occasionally incorporating AI information from related inquiries. I’m using AI in this series, because AI does a decent job of capturing the gist of its source material. However, I don’t assume the source material reflects the whole range of expert opinion on these issues.
Question 2: If billionaires had to liquidate 5% of their wealth to pay a wealth tax, how would that impact their companies? *
A 5% wealth tax requiring billionaires to liquidate assets would likely force significant, consistent sell-offs of company stock, potentially diluting founder control, depressing share prices, and discouraging long-term, high-risk investments. Companies might face reduced capital for expansion, increased corporate consolidation, and potential relocation of businesses to lower-tax jurisdictions. Companies might see reduced valuations as founders sell shares to pay taxes, potentially curbing innovation and long-term expansion.
Key impacts on companies and markets include:
Forced Liquidation & Stock Price Pressure: Frequent, large-scale selling of company shares to pay taxes could lead to a decline in stock prices, harming other investors and limiting capital access.
Dilution of Control: Founders and key stakeholders might lose control over their firms as they are forced to reduce their ownership percentages annually.
Reduced Innovation and Investment: By reducing the after-tax return on investment, wealth taxes can decrease incentives to take risks, invest in R&D, and expand operations.
Increased Corporate Consolidation: Smaller firms might be forced to merge with larger companies or sell early to meet tax obligations, reducing overall market competition.
Capital Flight: Wealthy individuals and their businesses might relocate to states or countries with more favorable tax environments.
Stock Market Volatility: Large-scale, regular selling of shares by founders could depress stock prices for companies like Tesla, Apple, or Nvidia.
Reduced Capital for Investment: A 5% annual hit on net worth directly reduces funds available for reinvestment in research, development, and expansion.
Corporate Consolidation: To manage tax liabilities, founders might merge companies or sell to larger competitors.
Founder Flight: High wealth taxes may drive entrepreneurs to move their businesses and residency to countries with lower tax burdens.
Reduced Risk-Taking: Entrepreneurial incentives could decline, leading to fewer startups and less innovation.
Low-Liquidity Crises: Billionaires with most wealth tied up in business assets may face severe pressure to sell, as their liquid cash is insufficient to pay the tax.
Management Distraction: The need to restructure portfolios and manage tax liability could distract leadership from core business operations.
While some argue a 5% tax would raise substantial revenue for public services, others contend it would fundamentally hinder long-term economic growth by penalizing successful, growing companies.
Sources: Poole College of Management (2024), The Tax Foundation, 2026, Yahoo Finance, 2026, Forbes, 2026, Oxford Academic, 2022, Cato Institute, 2026.
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* Over 70% of U.S. billionaires owe their wealth to owning, founding, or running companies, whether public or private. (University of Chicago Booth School of Business, Altrata, 2024, Cato Institute, 2025)