Michael Jackson died on June 25, 2009. That was a long time ago. Just yesterday, the U.S. Tax Court determined that Michael Jackson’s image was worth $4.2 million. The IRS had initially asserted it was worth $161 million, but, now, nearly 12 years after Jackson’s death, the value has come in at a tiny fraction of that. What does this have to do with the wealth tax?
The wealth tax would require that the total assets of an individual would be valued and taxed annually. This could presumably mean the value of a person’s image would be included in their total net wealth (most politicians floating these ideas are big into “no exceptions” lines in their speeches, despite almost no real tax ever having no exceptions). That the IRS claimed a value of $161 million, and the final total, 12 years later, was $4.2 million, is pretty compelling evidence at how complex some assets are to value, and how painful the litigation process can be to arrive at the final value.
One feature of the Jackson case was that Michael was about to stage a big comeback when he died, and, right after his death his image became more valuable—it was difficult for the Jackson estate and the IRS to come to terms on a value, given that his value had changed so much in just a short period after his death. These abrupt changes in value are especially important in the case of a wealth tax assessed annually–it is hard to just rely on prior year’s valuations for some assets.
So, if we had an annual wealth tax, how many people would have images, and other related intangible assets, that would be even worth valuing? I have no idea. And, I don’t think anyone else really does either. But, this is one of many strange assets that people would realize they have, that could be included in a wealth tax (if not explicitly excluded), that would make it hard to administer. And I suspect, were we to have a wealth tax, we would encounter many such assets.
