LinkedIn Influencer Martin Varsavsky published this post originally on LinkedIn.

Many wealthy entrepreneurs like Jeff Bezos go through life legally without paying taxes.

As Varsavsky explains, the IRS taxes income and gains, but when launching massive businesses like Amazon, leaders like Jeff Bezos don't actually have an income — they have a net worth based on the valuation of the company.

They don't pay themselves a high salary, nor do they sell shares. Most of expenses are paid by the company and are deductible since they likely live at work.

Because of this, he argues the best way to get entrepreneurs to pay taxes is to implement a "net worth" tax: a 0.25 to 0.5% yearly tax on the value of publicly traded shares.

Very successful one-company entrepreneurs like Jeff Bezos can go through life without legally ever paying any significant percentage of their gains.

This is how pre money valuations work: You are a beginner entrepreneur with an idea to start an online bookstore. You convince VCs to fund you, they invest say $30m and you nothing, but you now own two thirds of the company's shares and you have $30m inside your company.

Funded, you start the online bookstore, you thrive, grow like crazy, raise more funds, valuations skyrocket, you go public and two decades later you own, say, 16% of a one trillion dollar company.

Until then you barely paid any taxes, nor invested any money, and you are the richest man in the world.

How? Well you "printed" your own pre-money currency, turned it into publicly traded shares, and you never sold. None of these were taxable events.

When you needed money you just borrowed, a growing revolving loan for your personal expenses, say $500m against your net worth of $160bn over two decades. Borrowing is tax free and with such low leverage, in such a low interest rate environment you can rollover the loan throughout your whole life increasing it slightly because your living expenses are so far from your net worth that you never need income nor capital gains.

The reason why this strategy is perfectly legal is because the IRS is focused on taxing income and gains. But as Jeff Bezos showed, you can become the richest man in the world without ever having any significant income and without ever having significant capital gains.

You don't pay yourself a high salary nor do you sell shares. Most of your expenses are paid by your company anyway, and are deductible, since you mostly live at work.

And variations of this narrative are similar for all of those in the Forbes billionaire list whose net worth comes from holdings of companies they founded or joined at very low valuations and are now public, or whose value is known so you can borrow against the stock.

What top US entrepreneurs are doing is rational, legal, and has a good side: It commits them to their company.

But the negative aspect for the rest of the taxpayers is that they never pay taxes in an absolutely legal way.

But there is a solution for this that has been adopted in Europe and some other countries already called a net worth tax.

2% net worth taxes, as Spain has for example, are dumb and drive business away. Net worth taxes, like all taxes, have to be at a rate such that collection does not affect economic behavior.

In this case I estimate that 0.25 to 0.5% yearly tax on the value of publicly traded shares would make a lot of sense. In this way the richest would also pay taxes and USA would closer to balance the budget deficit.

Jeff Bezos himself would pay say $500m per year. Not an insignificant amount. All other billionaires would pay $5m per billion of net worth per year.

This is a much better plan than raising income tax rates to 70%, because as crazy as it sounds, the richest people in the world have no income. This tax would not be paid by those whose ordinary income tax or capital gains tax exceeds this tax so it would tackle the precise challenge of the Bezos of this world. Those who have built gigantic net worths and never legally paid taxes.

Other countries have closed this loophole, and it is time for USA to do the same.

Moreover, I would be surprised if many billionaires oppose this — most end up giving up similar or larger amounts through their philanthropic efforts. There is also an opportunity for states to implement this measure, but it would be fairer at the federal level.

Martin Varsavsky is a technology entrepreneur founder of 6 companies in the USA and Europe. His latest two companies are Prelude Fertility the largest chain of fertility clinics in the USA and Overture Life a company that makes a new type of embryology equipment.