Wealth

Starwood CEO Barry Sternlicht calls wealth tax, favored by Warren and Sanders, a 'crazy idea'

Key Points
  • Sternlicht also reacts to a radical proposal from two UC Berkeley economics professors on how to fully account for taxpayer wealth.
  • UC Berkeley's Emmanuel Saez and Gabriel Zucman, who helped design Elizabeth Warren's tax plan, proposed the IRS calculate values for private companies.
  • Questioning how the IRS would be able to value his business, Sternlicht says, "It's almost an impossible thing to do."
VIDEO0:5400:54
Barry Sternlicht: A wealth tax would be almost impossible to implement

Barry Sternlicht, co-founder of the privately held Starwood Capital global investment firm, believes a wealth tax, as envisioned by Democratic presidential candidates Sens. Elizabeth Warren and Bernie Sanders, would not be feasible.

"I think it's a crazy idea," Sternlicht said Friday on CNBC's "Squawk Box."

The wealth tax from Sanders, a Vermont democratic socialist, would be progressive, starting at 1% for household net worth of more than $32 million and ending at 8% on wealth over $10 billion. The plan from Warren, of Massachusetts, calls for a 2% tax on household net worth of more than $50 million and a 3% tax on net worth over $1 billion.

Sternlicht, chairman and CEO of Starwood Capital, also reacted to a radical proposal from two University of California, Berkeley economics professors on how to account for the wealth of people who derive large sums of their net worth from private companies.

UC Berkeley's Emmanuel Saez and Gabriel Zucman, who helped design Warren's tax plan, proposed that the Internal Revenue Service calculate values for private companies that can be figured into the complete wealth picture of taxpayers.

Questioning how the IRS would be able to value his business, Sternlicht said, "It's impossible to do — multiples, changes in interest rates. It's almost an impossible thing to do."

Sternlicht started Starwood Capital in 1991. It currently has more than $60 billion in assets in global real estate and hotel management, as well as the oil and gas sectors and energy infrastructure. Starwood Capital created the Starwood Hotels chain, which is now part of Marriott International.

If the Saez-Gabriel Zucman plan were to become a reality, Sternlicht said, "You're going to empower a lot of accountants. They're going to be the biggest, fastest-growing industry in the world."

VIDEO7:2007:20
One of the economists behind the Warren wealth tax explains the policy

Zucman, who appeared on "Squawk Box" on Tuesday, explained the idea that Saez and he proposed in their book, "The Triumph of Injustice."

"The IRS would come up with the best valuation possible" for private companies, said Zucman. "If the taxpayers disagree, they can pay, in kind, with shares."

The IRS would then sell those shares, as described in their book, to the "highest bidders on a market open to all bidders — venture capitalists, private equity funds, foundations, or other families interested in acquiring a stake."

"The point is not for the government to own shares," Zucman said on CNBC. "It's to resell immediately, but to create the market value that's missing."

CNBC reached out to the campaigns of Warren and Sanders. Neither was immediately available to comment on Sternlicht's remarks.

Sign Up for Our Newsletter Morning Squawk

CNBC's before the bell news roundup
Get this delivered to your inbox, and more info about about our products and services.
By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.
Next Article
Key Points
  • Sternlicht says that while WeWork has had its failures, there's still a real business to be found at its core.
  • "It was built for hypergrowth and that is too capital intensive," says the Starwood Capital co-founder.
  • With WeWork facing a cash crunch, SoftBank and J.P. Morgan are working to put together a financial rescue package, according to sources.