Well, yes. But that’s not how Bezos and the other billionaires do it. They never sell their stock. They simply borrow against them and accumulate debt. Bezos new $500 million yacht will be 100% financed by a bank that is eager to lend him the money. When the note is due though, he won’t sell stock to pay it off, or even give them stock. That would create a substantial tax issue for him. Instead he just borrows again from eager lenders, often the same ones. On paper they’re getting rich off these loans.
How are they getting rich off them? But, but, that would imply Bezos is [gasp]
paying them interest! The eager lenders pay tax on that, just as the yacht-builders pay tax on what they're paid. Whatever of Bezos' hypothetical wealth that he turns into real wealth he can consume and enjoy, the government gets its cut.
Bezos and Musk pay little if any tax, because on paper they do not make any money. But their net worth is soaring. They never realize the gains they’ve made this way. Their true tax rate is less than 4%.
What the heck makes that their "true" tax rate? What you call their "net worth" is just another way to say "what other people are willing to give Bezos and Musk in exchange for Bezos and Musk doing something for those other people that Bezos and Musk do not, in point of fact, do for them".
Hey, I've got an awesome idea for a new business! I'm going to create a website, hosted in Russia where this sort of thing isn't actionable, where visitors can bid on one night of sex with all the hottest Hollywood actresses. It's a link-up site -- when the going rate for Emma Stone is a thousand dollars a night, Emma Stone is welcome to click "Accept", my website will process the buyer's credit card and pay Ms. Stone $900, and I'll pocket a 10% finder's fee. (Of course it's an entertainment site -- none of the actresses ever actually accept -- and I make all my money on obnoxious pop-up ads just like every other website on the net.)
So I'm guessing you figure the IRS should tax Emma Stone 39.6% on her unrealized extra $356,000 of net worth, the value of a year of her prostitution services, even though she elected not to sell them?
Ordinary workers are paying 15% just for social security tax!
But they get most of that back in SS benefits when they retire. According to an actuarial analysis I read, Social Security is 15% a welfare program for poor old people and 85% an individual pension plan. If that's correct, the actual component of SS that's a regressive tax is about 1.9%. Worth fixing, sure, but nowhere near big enough to make the overall tax system regressive.
One way to stop this merry go round is to tax estates at very, very high rates.
I would think simply taxing estates as ordinary income would do the job. The government gets its cut of what other people are willing to give Bezos for his stuff when other people get his stuff, same as if he were a perfectly respectable sex worker.
The capital gains rate hasn't been 20% for years -- it went up to 24% back during the Obama administration.