If you're looking to pass a new ordinance and/or create a new tax, it's important to have the right name. Take, for example, Los Angeles' new "mansion tax." The majority of people do not have a so-called "mansion." And so signaling to people that you're going to tax this thing and then redistribute the funds to help others with better housing is, not surprisingly, attractive to many. Here's how the new tax works:

Known as Measure ULA — for “United to House LA” — the ordinance marketed as a “mansion tax” will impose a 4% tax on property sales above $5 million, rising to 5.5% on sales above $10 million. So a $5-million sale would include a $200,000 tax, and a $10-million sale would include a $550,000 tax, which is typically paid by the seller.

Of course, if you're a rich person with a mansion, your first thought is going to be, "how do I avoid having to pay this?" Here are two unproven and possibly illegal options that I am not condoning in any way:

For example, if a homeowner is selling a mansion for $15 million, they’d be slapped with a $825,000 tax bill. But if they split up the property into three parts owned by three different entities and sold all three pieces for $4.999 million each, they would hypothetically elude the tax since it only kicks in at $5 million.

Another strategy might be to hatch deals off the books to keep a sale under $5 million. For example, if a seller wanted $7 million for their house, they could reach a deal with a buyer to sell it for $4.999 million, thus avoiding the tax, but then sell the furniture in the home for $2 million.

I don't have a mansion, so I'm fortunate enough not to have to worry about such things. But I do think about the impact on things like new rental supply. My understanding of the ordinance is that if you're a developer of rental housing, and you buy a lot for $4.99 million, build a mid-market apartment, and then turn around and sell it to a pension fund for $10.01 million, you would be subject to this new tax.

Hmm. I wouldn't call this a mansion.

Back in the old days, and by the old days I mean the 1980s, there were a handful of ways in which you were likely to get rich. You either inherited it, or you made it in oil or real estate. The Forbes list of the 100 richest Americans was first published in 1982 and, at that time, 60 of the people on this list had inherited their wealth. Of the 40 new fortunes on the list, about 60% were primarily related to oil or real estate. If you couldn't inherit your money, these two industries were a good place to start.

But as Paul Graham explains in this recent essay about "how people get rich now," this is no longer the case. On the 2020 list, there were 73 new fortunes, but only 4 stemmed from real estate and only 2 stemmed from oil. As you might imagine, today's biggest driver is what we call tech and, more specifically, it is people founding tech companies (there are also a couple of examples of early employees doing very well). Of the 73 new fortunes last year, approximately 30 came from tech, including 8 of the top 10 fortunes on the list.

Given how many people are starting new companies today (it has become easier and cheaper) and given how many of these companies are quickly growing to big valuations (things are scaling faster), it is perhaps tempting to think about this period of time as being entirely unprecedented. Never before have we seen so many young people getting rich by starting their own company. And never before have we seen such inequality.