ProPublica's tax story(savingjournalism.substack.com)
savingjournalism.substack.com
ProPublica's tax story
https://savingjournalism.substack.com/p/propublicas-bombshell-bullshit-tax
414 comments
>One of the billionaires mentioned in this article objected, arguing that publishing personal tax information is a violation of privacy. We have concluded that the public interest in knowing this information at this pivotal moment outweighs that legitimate concern
I don't see why they couldn't have anonymized the data [bracketed] and have the same impact. Exact figures are less relevant than providing a picture of what's going on. I think the only reason is to doxx and "shame" or whatever unrelated rationale they have.
And why isn't Twitter suspending their account for doxxing --which they appear to apply unevenly but usually not levelled against birds of a feather.
I don't see why they couldn't have anonymized the data [bracketed] and have the same impact. Exact figures are less relevant than providing a picture of what's going on. I think the only reason is to doxx and "shame" or whatever unrelated rationale they have.
And why isn't Twitter suspending their account for doxxing --which they appear to apply unevenly but usually not levelled against birds of a feather.
As Arnold says, this stuff has been known for years or decades but it has had little or no impact. It's well known that specific cases are more persuasive than generalities, so it looks like ProPublica is trying to use that effect to spark more discussion about wealth taxes.
Edit: I don't agree with what ProPublica is doing here, but I can understand how the ends might justify the means from their perspective.
Edit: I don't agree with what ProPublica is doing here, but I can understand how the ends might justify the means from their perspective.
I dunno. I don’t think it’s right, if the person has not done something illegal.
What’s next, some news org wants Biden out, they don’t have a legit source, but a foreign source has dirt on him, now that’s cool cuz they want to change public opinion of Biden?
Was the pearl clutching around Biden’s son’s laptop material being illegally obtained just a flimsy excuse? [uh oh, it’s doxxing, it’s doxxing... suspend their Twitter, Jack are you listening?]
What’s next, some news org wants Biden out, they don’t have a legit source, but a foreign source has dirt on him, now that’s cool cuz they want to change public opinion of Biden?
Was the pearl clutching around Biden’s son’s laptop material being illegally obtained just a flimsy excuse? [uh oh, it’s doxxing, it’s doxxing... suspend their Twitter, Jack are you listening?]
> I don’t think it’s right, if the person has not done something illegal
Public interest is the right threshold. Just because somebody has done something illegal, does not mean that their privacy is worthless. Likewise, hypocrisy is not illegal, but documenting the hypocrisy of the powerful is often in the public interest.
Public interest is the right threshold. Just because somebody has done something illegal, does not mean that their privacy is worthless. Likewise, hypocrisy is not illegal, but documenting the hypocrisy of the powerful is often in the public interest.
zorpner(5)
These billionaires are significant public people enough that this absolutely falls in the public interest enough to warrant disclosing their identities. Same with politicians. There is legal precedence for this and the norm in journalism.
What? Who says so? A politician politicking or a person trading on their looks or public stage persona certainly can expect some invasion of privacy, but even they don’t deserve illegal means of information gathering[1] even less a person just because they happen to be billionaires.
“Norms” don’t define things as right. I’m pretty sure we can think of some dark examples.
[1]I think I read about something called “The Watergate Scandal” about illegal gathering of information...
“Norms” don’t define things as right. I’m pretty sure we can think of some dark examples.
[1]I think I read about something called “The Watergate Scandal” about illegal gathering of information...
Elon Musk isn’t trading on his public stage persona?
That aside, I guess I just don’t have much sympathy. If certain “rules” are gonna apply to billionaires and not normal people, that seems fine by me. It might seem “biased” or “unfair” to some people, but hey: Who ever said we were operating in a “fair” context to begin with? Sure this kind of bias could be turned against more vulnerable people, it already is, it’s about time it got turned against the people at the top.
That aside, I guess I just don’t have much sympathy. If certain “rules” are gonna apply to billionaires and not normal people, that seems fine by me. It might seem “biased” or “unfair” to some people, but hey: Who ever said we were operating in a “fair” context to begin with? Sure this kind of bias could be turned against more vulnerable people, it already is, it’s about time it got turned against the people at the top.
> certainly can expect some invasion of privacy
On certain public things, yes. On illegally obtained private finance info - no.
On certain public things, yes. On illegally obtained private finance info - no.
As someone who works in the field (government not journalism) with similar data (not IRS data) and has watched others have to implement various privacy laws (including the same federal ones the IRS has to follow on the matter), there are also requirements on the minimum number of data-points when releasing information.
For instance, an aggregate number of only 10 data-points is enough for people inside those 10 data-points to band together and out the real information of the remaining people through collective action, as an example. There are thousands of similar contingencies planned for.
So if you publish this data redacted, it's still a violation of the privacy laws because you can figure out easily who is whom since there are only a few billionaires and there's enough information provided to narrow down people's identity by looking at public information.
As for Twitter or whatever, I believe the law technically was violated only by the person who handed the data to the journalists. After that the journalists can't be held accountable unless they aided in some way in obtaining or they directly requested the data from the individual or group or whomever it was that did this.
Honestly, though, this is why people in these positions are held to extremely high standards and it ends up being frustrating when others fall through like this. It's too easy to occur, and these roles are rarely compensated well or have any "backup" for technical tasks since it's all based on who organizations trust, so they can't hire anyone to help and we end up thinly spread.
Add a small dash of political or financial incentive and suddenly the data you have been working to design to protect from Russian hackers becomes technologically meaningless when someone just leaks it who has direct access. I'm surprised there aren't more of these happening given the dire straits many of us are in, out in the wild-west on our own with nobody to even talk to about it and nobody willing to work in government (or to not be assumed to be trustworthy enough to have access).
For instance, an aggregate number of only 10 data-points is enough for people inside those 10 data-points to band together and out the real information of the remaining people through collective action, as an example. There are thousands of similar contingencies planned for.
So if you publish this data redacted, it's still a violation of the privacy laws because you can figure out easily who is whom since there are only a few billionaires and there's enough information provided to narrow down people's identity by looking at public information.
As for Twitter or whatever, I believe the law technically was violated only by the person who handed the data to the journalists. After that the journalists can't be held accountable unless they aided in some way in obtaining or they directly requested the data from the individual or group or whomever it was that did this.
Honestly, though, this is why people in these positions are held to extremely high standards and it ends up being frustrating when others fall through like this. It's too easy to occur, and these roles are rarely compensated well or have any "backup" for technical tasks since it's all based on who organizations trust, so they can't hire anyone to help and we end up thinly spread.
Add a small dash of political or financial incentive and suddenly the data you have been working to design to protect from Russian hackers becomes technologically meaningless when someone just leaks it who has direct access. I'm surprised there aren't more of these happening given the dire straits many of us are in, out in the wild-west on our own with nobody to even talk to about it and nobody willing to work in government (or to not be assumed to be trustworthy enough to have access).
When did a journalist ever not claim "public interest" I am sure that the paparazzi that chased princess Di to heard death would claim that.
Indeed, this is such a pervasive question for journalists that they have entire courses on "journalistic ethics."
ProPublica even wrote a long statement on why they believe publishing this is ethical, legal, and in the public interest: https://www.propublica.org/article/why-we-are-publishing-the....
You can of course disagree with their reasoning, but Arnold—who claims to be, it is worth noting, a paid PR flack for tech companies—is being disingenuous* to suggest that ProPublica claimed their "sole criteria for publishing" is "truth".
* By which I mean, to be perfectly clear, he's a liar.
ProPublica even wrote a long statement on why they believe publishing this is ethical, legal, and in the public interest: https://www.propublica.org/article/why-we-are-publishing-the....
You can of course disagree with their reasoning, but Arnold—who claims to be, it is worth noting, a paid PR flack for tech companies—is being disingenuous* to suggest that ProPublica claimed their "sole criteria for publishing" is "truth".
* By which I mean, to be perfectly clear, he's a liar.
lol at "paid flack". Brb gonna update my LinkedIn.
Anyway, I awarded a correction bounty here. I'd said in the same piece "if your only criteria for publishing are some measure of verification and some measure of newsworthiness", but used poor phrasing in saying "sole criteria" prior. I don't think it was likely to mislead the fair reader. But a mistake is a mistake, and I'm happy to own it.
Anyway, I awarded a correction bounty here. I'd said in the same piece "if your only criteria for publishing are some measure of verification and some measure of newsworthiness", but used poor phrasing in saying "sole criteria" prior. I don't think it was likely to mislead the fair reader. But a mistake is a mistake, and I'm happy to own it.
You wrote before, "TLDR is I'm a copywriter turned comms consultant. I work mostly with tech companies."
"lol at" = not actually denying it, so not technically lying, right? ;)
"lol at" = not actually denying it, so not technically lying, right? ;)
Flack is a pejorative, and really speaks to spokespeople, which I'm not.
I write all the time about what my day job is, and I regularly disclose it whenever there is even an vague intersection with a story I'm writing. It's not a secret!
Lots of people drift between comms and public writing. When there's a perception of conflict, they disclose. As do I. Pretty routine.
I write all the time about what my day job is, and I regularly disclose it whenever there is even an vague intersection with a story I'm writing. It's not a secret!
Lots of people drift between comms and public writing. When there's a perception of conflict, they disclose. As do I. Pretty routine.
OP here. Pondering this.
"Delaying a tax is not avoiding a tax. Tax avoidance is a term of art (distinct from tax evasion) that speaks to maximizing deductions/credits and optimizing income categorization. ..."
Dragging debate into the minutiae distracts from the cogent moral objection. Time honored technique.
Observing that inequity is accelerating does not and should not require a CPA.
"They’re right about the laws, but incurious about why the laws are that way (not just in the US, but across the developed world).:"
Opinions differ.
You do not cite the original precedent setting court case.
Nor do you cite the prescient objections which have proven true.
Further, you do not acknowledge the central issue, nor offer any guidance or wisdom for possible remedies.
Lastly, I don't like your clickbait title.
Dragging debate into the minutiae distracts from the cogent moral objection. Time honored technique.
Observing that inequity is accelerating does not and should not require a CPA.
"They’re right about the laws, but incurious about why the laws are that way (not just in the US, but across the developed world).:"
Opinions differ.
You do not cite the original precedent setting court case.
Nor do you cite the prescient objections which have proven true.
Further, you do not acknowledge the central issue, nor offer any guidance or wisdom for possible remedies.
Lastly, I don't like your clickbait title.
Good to know you’re pondering.
OP here. Slept on it.
I said in that same segment "if your only criteria for publishing are some measure of verification and some measure of newsworthiness". In re-reading their piece, that's all they checked for. So what I said seems substantially accurate to me.
But as a matter of phrasing, it's true that I used "sole criteria" above, which was sloppy. So I'll award a bounty on that. See your email.
I said in that same segment "if your only criteria for publishing are some measure of verification and some measure of newsworthiness". In re-reading their piece, that's all they checked for. So what I said seems substantially accurate to me.
But as a matter of phrasing, it's true that I used "sole criteria" above, which was sloppy. So I'll award a bounty on that. See your email.
It’s very clear that the original article was a hit piece/advocacy editorial more than anything else. If you don’t believe, go look at the cover of drudge right now, where he’s using it to go after his favorite target, Elon musk. (making a claim that even the pro Publico article doesn’t make).
All that said there’s a fundamental challenge here. People conflate unrealized wealth with income because loans offer a mechanism with cash today while deferring tax until later.
As pointed out in many places, we target the 1% at the expense of not going after the .1% or even a .01%. I think it makes perfect sense for somebody to say that any loan that is backed by stocks granted on the basis of RSU, incur some additional special taxes. For all intents and purposes the principal is Realizing some of the value of the stock by getting a loan against a stock.
Unfortunately articles like this which conflate things actually make it harder for us to fix the real loophole.
Im fortunate to temporarily be a member of the top 1%, but not the top .1% or the top .01% my tax burden last year was 40%. That’s not including healthcare or government fees. I’m fine with that, but the fact that both people earning more than I, and earning less than I pay less in taxes as a percent is incredibly irritating.
Articles like this will result in politicians blindly saying the rich need to be taxed more while the hyper Rich continue to skirt taxes.
All that said there’s a fundamental challenge here. People conflate unrealized wealth with income because loans offer a mechanism with cash today while deferring tax until later.
As pointed out in many places, we target the 1% at the expense of not going after the .1% or even a .01%. I think it makes perfect sense for somebody to say that any loan that is backed by stocks granted on the basis of RSU, incur some additional special taxes. For all intents and purposes the principal is Realizing some of the value of the stock by getting a loan against a stock.
Unfortunately articles like this which conflate things actually make it harder for us to fix the real loophole.
Im fortunate to temporarily be a member of the top 1%, but not the top .1% or the top .01% my tax burden last year was 40%. That’s not including healthcare or government fees. I’m fine with that, but the fact that both people earning more than I, and earning less than I pay less in taxes as a percent is incredibly irritating.
Articles like this will result in politicians blindly saying the rich need to be taxed more while the hyper Rich continue to skirt taxes.
> Unfortunately articles like this which conflate things actually make it harder for us to fix the real loophole.
While I would consider that a loophole, I'm not sure it's the main problem. I feel that for all the complaints and logic of the substack piece, it misses the point of the propublica one, the kind of underlying feeling that's driving it: that it's unfair that the wealthiest people in the world pay so little tax compared to people in the 10% to .1% bracket, and even compared to people in lower brackets. It's unfair that they can gain extraordinary amounts of wealth, to such a degree that it's impractical for them to even use, and yet not be taxed on any of it, unrealized or no.
Because from my perspective, my monetary gains (eg. salary) don't really feel realized until I use them to buy something. Cash in the bank doesn't do much but make me feel financially safer - so why is taxing income considered reasonable, but wealth is not? And why, exactly, is it apparently reasonable to have sales taxes that don't exceed 12% (disclaimer - in the states, as far as I know); capital gains at 15%; but my income at 25%, 35%, 45%? Why is considering taxing wealth like company shares "far left end" but taxing other wealth, like my house, considered acceptable? Heck, we even have assessments and appraisals for real estate for the purpose of determining value without selling, for more accurate taxes and associated financial instruments - but taxing something that has a constant active market is the thing that's weird?
The way that the substack article fails to mention Warren's millionaire wealth tax proposal is a further disappointment, and leaves me feeling like it is also a fairly weak piece of journalism, not unlike the one it criticizes. It also makes little mention of the ever-higher bracket of the estate tax, and has bits like
> Sometimes stock prices go down, and that's generally not a write-off. So taxing the upside at an arbitrary point is unfair and kind of just silly.
Just because it isn't a write off now doesn't mean it couldn't be if some sort of wealth tax was implemented; this a poor-faith considering of the policy. In short, while I wouldn't consider the original article to be of much merit, and certainly below propublica's usual standard, this rebuttal is hardly any better.
While I would consider that a loophole, I'm not sure it's the main problem. I feel that for all the complaints and logic of the substack piece, it misses the point of the propublica one, the kind of underlying feeling that's driving it: that it's unfair that the wealthiest people in the world pay so little tax compared to people in the 10% to .1% bracket, and even compared to people in lower brackets. It's unfair that they can gain extraordinary amounts of wealth, to such a degree that it's impractical for them to even use, and yet not be taxed on any of it, unrealized or no.
Because from my perspective, my monetary gains (eg. salary) don't really feel realized until I use them to buy something. Cash in the bank doesn't do much but make me feel financially safer - so why is taxing income considered reasonable, but wealth is not? And why, exactly, is it apparently reasonable to have sales taxes that don't exceed 12% (disclaimer - in the states, as far as I know); capital gains at 15%; but my income at 25%, 35%, 45%? Why is considering taxing wealth like company shares "far left end" but taxing other wealth, like my house, considered acceptable? Heck, we even have assessments and appraisals for real estate for the purpose of determining value without selling, for more accurate taxes and associated financial instruments - but taxing something that has a constant active market is the thing that's weird?
The way that the substack article fails to mention Warren's millionaire wealth tax proposal is a further disappointment, and leaves me feeling like it is also a fairly weak piece of journalism, not unlike the one it criticizes. It also makes little mention of the ever-higher bracket of the estate tax, and has bits like
> Sometimes stock prices go down, and that's generally not a write-off. So taxing the upside at an arbitrary point is unfair and kind of just silly.
Just because it isn't a write off now doesn't mean it couldn't be if some sort of wealth tax was implemented; this a poor-faith considering of the policy. In short, while I wouldn't consider the original article to be of much merit, and certainly below propublica's usual standard, this rebuttal is hardly any better.
As others have pointed out, your cash in the bank is actual money in a sense that (say) Musk or Bezos' wealth isn't - you can actually buy things with it, whereas if they want to sell their shares to buy something else they need to find someone with enough actual money who's willing to trade it for shares which may or may not be worth something down the line.
The really big problem is that regardless of where the money comes from on paper, in an important sense all the big government spending has to be paid for out of that actual money in the form of people's income. Suppose the government carries out a big series of infrastructure projects, or even say AOC's plan for mass upgrading of home insulation. That will use a huge amount of scarce resources like raw materials, workers' time, equipment etc which then cannot be used for other things. Which means that whatever would've otherwise been made with those resources no longer exists to be consumed, and that everyone overall is worse off in terms of stuff they can buy with their income by the amount required to offset this cost. This real tax on the actual real value of everyone's income cannot come out of Bezos and Musk and the other multi-billionaires' wealth, because the amount of stuff they consume is tiny compared to their paper wealth. It has to come from ordinary people. (A similar argument applies to the cost of shuttering all those businesses and paying their workers to sit around doing nothing during the pandemic.)
Now of course, a lot of big companies do themselves use a bunch of resources, but take those away and you lose whatever the company is supplying. No Amazon warehouses? Suddenly a lot less stuff is available to be ordered online. No Tesla factories? Say bye-bye to clean electric cars and hello to more pollution and CO2. Etc, etc.
The really big problem is that regardless of where the money comes from on paper, in an important sense all the big government spending has to be paid for out of that actual money in the form of people's income. Suppose the government carries out a big series of infrastructure projects, or even say AOC's plan for mass upgrading of home insulation. That will use a huge amount of scarce resources like raw materials, workers' time, equipment etc which then cannot be used for other things. Which means that whatever would've otherwise been made with those resources no longer exists to be consumed, and that everyone overall is worse off in terms of stuff they can buy with their income by the amount required to offset this cost. This real tax on the actual real value of everyone's income cannot come out of Bezos and Musk and the other multi-billionaires' wealth, because the amount of stuff they consume is tiny compared to their paper wealth. It has to come from ordinary people. (A similar argument applies to the cost of shuttering all those businesses and paying their workers to sit around doing nothing during the pandemic.)
Now of course, a lot of big companies do themselves use a bunch of resources, but take those away and you lose whatever the company is supplying. No Amazon warehouses? Suddenly a lot less stuff is available to be ordered online. No Tesla factories? Say bye-bye to clean electric cars and hello to more pollution and CO2. Etc, etc.
> As others have pointed out, your cash in the bank is actual money in a sense that (say) Musk or Bezos' wealth isn't - you can actually buy things with it
Your cash in the bank is actual money in the sense that...
> No Amazon warehouses? Suddenly a lot less stuff is available to be ordered online. No Tesla factories? Say bye-bye to clean electric cars and hello to more pollution and CO2. Etc, etc.
...you can buy stuff from Musk and Bezos.
Your cash in the bank is actual money in the sense that...
> No Amazon warehouses? Suddenly a lot less stuff is available to be ordered online. No Tesla factories? Say bye-bye to clean electric cars and hello to more pollution and CO2. Etc, etc.
...you can buy stuff from Musk and Bezos.
No. The problem here isn't that Musk and Bezos are the only people you can buy stuff from, it's that in order to pay the real resource price of all that government spending using their factories and warehouses those factories and warehouses must not exist at all. They can't simply become Walmart warehouses or Toyota or GM factories, they have to go away altogether - along with whatever they're supplying. Which means a lot less clean electric cars and a lot less capacity to buy stuff online.
(The secondary problem is that the big multi-billionaire winners often get that way by figuring out how to satisfy the same consumer demand with less real resources. Which means that if you get rid of those companies, guess what? Everyone is worse off because the overall size of the pie has shrunk, and there's no clever redistribution of slice sizes that'll fix it. For example, without Tesla we'd have to burn more non-renewable oil and use more of our CO2 budget to fill the same transportation demand.)
(The secondary problem is that the big multi-billionaire winners often get that way by figuring out how to satisfy the same consumer demand with less real resources. Which means that if you get rid of those companies, guess what? Everyone is worse off because the overall size of the pie has shrunk, and there's no clever redistribution of slice sizes that'll fix it. For example, without Tesla we'd have to burn more non-renewable oil and use more of our CO2 budget to fill the same transportation demand.)
Bezos is practically a personal market black hole. His warehouse and delivery workers would certainly not be worse off if he was forced to pay them a decent wage. His customers would not be worse off if he was forced to operate an ethical search system on Amazon and remove scams.
If Amazon hadn't been invented, how long do you think it would have taken someone - probably a HN reader - to build a multisite search aggregator and bargain hunter?
Apple and Google's customers would not be worse off if all scams were removed from their respective app stores. Web users would not be worse off if Google search and ad tech didn't distort search rankings by promoting clickbait at the expense of high quality content.
YouTube's small content creators would not be worse off if the copyright strike system wasn't biased towards big corporate at the expense of small creators.
The electric car market would have happened without Musk. It may or may not have happened as well - that's up for debate - but it's clearly not going to not happen.
And the fact that we have a small but growing electric car market in 2021 instead of 2001 - when it was really needed - is entirely due to the political distortions caused by the billions generated in Big Fossil profits.
I have no problem with smart talented and driven individuals making money by solving real problems. But I do have a problem with attempts to deify and canonise the individuals who are most prominent just because they become very rich.
We need more accurate accounting systems that select for benefit without ignoring social, political, and environmental costs. Otherwise we're just rewarding people for being high-functioning narcissists instead of selecting people who can get shit done cheaply and efficiently without ignoring the social and other externalities that are currently ignored.
If Amazon hadn't been invented, how long do you think it would have taken someone - probably a HN reader - to build a multisite search aggregator and bargain hunter?
Apple and Google's customers would not be worse off if all scams were removed from their respective app stores. Web users would not be worse off if Google search and ad tech didn't distort search rankings by promoting clickbait at the expense of high quality content.
YouTube's small content creators would not be worse off if the copyright strike system wasn't biased towards big corporate at the expense of small creators.
The electric car market would have happened without Musk. It may or may not have happened as well - that's up for debate - but it's clearly not going to not happen.
And the fact that we have a small but growing electric car market in 2021 instead of 2001 - when it was really needed - is entirely due to the political distortions caused by the billions generated in Big Fossil profits.
I have no problem with smart talented and driven individuals making money by solving real problems. But I do have a problem with attempts to deify and canonise the individuals who are most prominent just because they become very rich.
We need more accurate accounting systems that select for benefit without ignoring social, political, and environmental costs. Otherwise we're just rewarding people for being high-functioning narcissists instead of selecting people who can get shit done cheaply and efficiently without ignoring the social and other externalities that are currently ignored.
Everything you say is equally true for income taxation as wealth taxation. In fact, it's true for all forms of taxation--at a high level, taxation is a way of redirecting the use of resources.
> Cash in the bank doesn't do much but make me feel financially safer - so why is taxing income considered reasonable, but wealth is not?
Your cash in the bank is guaranteed to not be erased tomorrow, up to the FDIC coverage limit.
Stock has no inherent value until it's sold at whatever price the market is willing to pay. Claiming that I've acquired "wealth" simply because of an increase in the current market price is an extreme stretch.
I don't have that money – I simply have the potential to sell my stock for some estimated, potential price.
Your cash in the bank is guaranteed to not be erased tomorrow, up to the FDIC coverage limit.
Stock has no inherent value until it's sold at whatever price the market is willing to pay. Claiming that I've acquired "wealth" simply because of an increase in the current market price is an extreme stretch.
I don't have that money – I simply have the potential to sell my stock for some estimated, potential price.
It is money in the bank effectively. tesla stock is extremely liquid. Elon can borrow against it, and has. So have other billionaires. this notion that paper wealth is not real wealth is just silly.
Loans aren’t considered income, and borrowing against stock carries risk that borrowing against other collateral does not.
> Stock has no inherent value until it's sold at whatever price the market is willing to pay.
> Claiming that I've acquired "wealth" simply because of an increase in the current market price is an extreme stretch.
You’re aware that the market price is what someone is willing to pay, right? It’s not theoretical, it’s backed up by someone willing to buy shares (a lot of them for Amazon) at the quoted price.
> Claiming that I've acquired "wealth" simply because of an increase in the current market price is an extreme stretch.
You’re aware that the market price is what someone is willing to pay, right? It’s not theoretical, it’s backed up by someone willing to buy shares (a lot of them for Amazon) at the quoted price.
> the market price is what someone is willing to pay, right?
Roughly speaking it's the price someone is willing to pay for one share. That doesn't say much about how much money Elon would receive if he liquidated his entire portfolio tomorrow. You can't just put 100+ BILLION dollars worth of anything on the market and expect there to be a buyer for all of it at yesterday's price. And furthermore, what is Tesla going to be worth when its chairman and CEO is seen to be dumping their shares?
I doubt Elon could even realise one quarter of his "net worth" if he needed it converted to US Dollars next week.
Roughly speaking it's the price someone is willing to pay for one share. That doesn't say much about how much money Elon would receive if he liquidated his entire portfolio tomorrow. You can't just put 100+ BILLION dollars worth of anything on the market and expect there to be a buyer for all of it at yesterday's price. And furthermore, what is Tesla going to be worth when its chairman and CEO is seen to be dumping their shares?
I doubt Elon could even realise one quarter of his "net worth" if he needed it converted to US Dollars next week.
Thing is, you don't need to actually convert if you want to pay, you can actually use the shares as a currency, a vehicule for value. Just like contemporary art. Not being spit dollars out is a problem for buying food, much less for making deals among high-level capitalists.
Is you are willing to tax wealth on the current value of an often illiquid asset, are you equally willing for the government to refund the owner if the value of an asset drops below the purchase price in the same tax year?
If not, why not?
If not, why not?
You should ask governments why they so consistently choose the opposite - bailouts for "too big to fail", and an ever-increasing round of tax breaks the rest of the time.
It may also have something to do with the fact that billionaires can buy significant political control of policy in our supposed democracies, while poor people organising to promote their interests are bullied and sneered at.
It may also have something to do with the fact that billionaires can buy significant political control of policy in our supposed democracies, while poor people organising to promote their interests are bullied and sneered at.
You already can mark down and carry losses forward into future tax years. Extremely wealthy people do this to get their taxes down to $0 regularly, including Trump.
Also, if I’m underwater on my house, I don’t get a break on my property insurance. I still have to pay the assessed rate.
This “no taxes if I take a loss” is an extremely selectively applied principle in the US legal code.
Also, if I’m underwater on my house, I don’t get a break on my property insurance. I still have to pay the assessed rate.
This “no taxes if I take a loss” is an extremely selectively applied principle in the US legal code.
In elons case - the vast majority of his wealth is stock options that he can’t physically use yet, under the terms of his reimbursement plan at Tesla.
That kind of illiquidity is not taken into account In this argument.
That kind of illiquidity is not taken into account In this argument.
https://www.tesmanian.com/blogs/tesmanian-blog/elon-musk-own...
(a) Amount beneficially owned: 227,131,935 shares which includes (i) 170,492,985 shares of Common Stock held by the Elon Musk Revocable Trust dated July 22, 2003 and (ii) options to purchase 56,638,950 shares of Common Stock that are exercisable within 60 days of December 31, 2020. On August 28, 2020, the Issuer effected a five-for-one stock split of its Common Stock (the “Stock Split”). The share numbers reported on this Schedule 13G / A reflects the Stock Split.
(b) Percent of class: 22.4% (percentage ownership is calculated based on 959,552,475 shares of Common Stock outstanding as of December 31, 2020 and assumes that the shares of Common Stock underlying the stock options are deemed outstanding pursuant to SEC Rule 13d-3 (d) (1) (i)).
(a) Amount beneficially owned: 227,131,935 shares which includes (i) 170,492,985 shares of Common Stock held by the Elon Musk Revocable Trust dated July 22, 2003 and (ii) options to purchase 56,638,950 shares of Common Stock that are exercisable within 60 days of December 31, 2020. On August 28, 2020, the Issuer effected a five-for-one stock split of its Common Stock (the “Stock Split”). The share numbers reported on this Schedule 13G / A reflects the Stock Split.
(b) Percent of class: 22.4% (percentage ownership is calculated based on 959,552,475 shares of Common Stock outstanding as of December 31, 2020 and assumes that the shares of Common Stock underlying the stock options are deemed outstanding pursuant to SEC Rule 13d-3 (d) (1) (i)).
> You’re aware that the market price is what someone is willing to pay, right?
Until I actually sell, it's merely a datapoint for very loosely estimating what the sale price will likely eventually be.
Until I actually sell, it's merely a datapoint for very loosely estimating what the sale price will likely eventually be.
Man, I wish I could sell that logic to the county assessor.
So do I. Yearly property tax assessments are an injustice.
No, it's wealth. There's a real issue here: asset prices can be volatile; someone can own a valuable house and not have enough to pay their groceries. But asset prices are not fictional. Typically, corporations report the value of their assets in their accounts.
> No, it's wealth.
AAPL is up 0.67% over yesterday. Let's pretend it's January 1st, and my net worth is tied up entirely in Apple stock. Should I pay taxes on that unrealized gain?
> Typically, corporations report the value of their assets in their accounts.
With the notable exception of feudal property taxes, we generally don't tax the mere possession of assets.
AAPL is up 0.67% over yesterday. Let's pretend it's January 1st, and my net worth is tied up entirely in Apple stock. Should I pay taxes on that unrealized gain?
> Typically, corporations report the value of their assets in their accounts.
With the notable exception of feudal property taxes, we generally don't tax the mere possession of assets.
> Should I pay taxes on that unrealized gain?
Did you read the whole of my comment? Yes, there is a real issue here.
Nobody should be put in the position of having a tax obligation they can't afford. Equally, nothing good is achieved by closely tracking the day-to-day volatility of stocks. But in general I don't think there is a fact of the matter about the kind of "ought" question you are asking in isolation: a tax regime is a system that should be judged as a whole.
> we generally don't tax the mere possession of assets.
Who is "we"? Many countries have wealth taxes.
Did you read the whole of my comment? Yes, there is a real issue here.
Nobody should be put in the position of having a tax obligation they can't afford. Equally, nothing good is achieved by closely tracking the day-to-day volatility of stocks. But in general I don't think there is a fact of the matter about the kind of "ought" question you are asking in isolation: a tax regime is a system that should be judged as a whole.
> we generally don't tax the mere possession of assets.
Who is "we"? Many countries have wealth taxes.
>Who is "we"? Many countries have wealth taxes.
Many meaning 7, right? 7 countries have net wealth taxes.
It used to be many - dozens of countries did it. They stopped doing it.
Many meaning 7, right? 7 countries have net wealth taxes.
It used to be many - dozens of countries did it. They stopped doing it.
Any country with a property tax has a form of a wealth tax. Most just don’t have one for total wealth.
Sure, but that's not what people talk about when they talk about 'wealth tax;' the accepted definition is net, not property.
As proof, if we already had a wealth tax and people referred to it that way, the past year and a half wouldn't have had people arguing over whether or not we should introduce a wealth tax. It would be whether we should expand the wealth tax to cover new assets.
As proof, if we already had a wealth tax and people referred to it that way, the past year and a half wouldn't have had people arguing over whether or not we should introduce a wealth tax. It would be whether we should expand the wealth tax to cover new assets.
Also, I think it's quite common outside of the USA for property taxes not to be based on the current market price of the property and also not to be charged at a fixed percentage of the value, both of which make them rather different from any proposed wealth tax.
> Should I pay taxes on that unrealized gain?
People sure do pay taxes on "unrealized gain" of the houses they live in when the real estate market heats up in their neighborhood, and the property tax assessor gleefully changes their assessment that year.
"But equities can go to zero!"
Sure, just as a house can go to zero (fire, acts of God-level insurance incidents).
"But those are covered by insurance!"
Sure, just as you are free to buy options to insure the equities.
I'm not really seeing strong arguments based upon some intrinsic property of financial instruments used at scale granting them capital gains treatment against taxing financial instruments like any other property / real asset. There is the whole "hold Grandma's retirement hostage" policy aspect that can be mitigated by a generous cliff and age means test perhaps, I haven't thought about that mitigation much, as well as capital gains at different scales. But at the policy level, capital gains treatment being so non-linearly favorable at scale compared to income tax treatment seems a reasonable topic to explore in public discourse. I'm not averse to capital gains continuing at smaller scales, even at millionaire scales, but I am curious what the economic rationale is to continue that treatment at the billionaire scales when it seems much like income on a more complex level.
People sure do pay taxes on "unrealized gain" of the houses they live in when the real estate market heats up in their neighborhood, and the property tax assessor gleefully changes their assessment that year.
"But equities can go to zero!"
Sure, just as a house can go to zero (fire, acts of God-level insurance incidents).
"But those are covered by insurance!"
Sure, just as you are free to buy options to insure the equities.
I'm not really seeing strong arguments based upon some intrinsic property of financial instruments used at scale granting them capital gains treatment against taxing financial instruments like any other property / real asset. There is the whole "hold Grandma's retirement hostage" policy aspect that can be mitigated by a generous cliff and age means test perhaps, I haven't thought about that mitigation much, as well as capital gains at different scales. But at the policy level, capital gains treatment being so non-linearly favorable at scale compared to income tax treatment seems a reasonable topic to explore in public discourse. I'm not averse to capital gains continuing at smaller scales, even at millionaire scales, but I am curious what the economic rationale is to continue that treatment at the billionaire scales when it seems much like income on a more complex level.
There are also second order effects. Higher wealth taxation combined with clamp-downs on tax evasion, money laundering, and other illegal and semi-legal-for-now activities would stabilise money markets and keep Grandma's money safer.
Extreme losses are caused by the manic-depressive boom-bust cycle which is in turn caused by plentiful money chasing fraudulent opportunities that don't really exist. (See also, S&L crisis, securitisation failures, and many many more.)
Damping that cycle and turning it into an engine for national profit sharing would raise collective prosperity, increase social mobility, and create new opportunities.
Extreme losses are caused by the manic-depressive boom-bust cycle which is in turn caused by plentiful money chasing fraudulent opportunities that don't really exist. (See also, S&L crisis, securitisation failures, and many many more.)
Damping that cycle and turning it into an engine for national profit sharing would raise collective prosperity, increase social mobility, and create new opportunities.
> AAPL is up 0.67% over yesterday. Let's pretend it's January 1st, and my net worth is tied up entirely in Apple stock. Should I pay taxes on that unrealized gain?
This isn’t actually an argument against the idea that you’re wealthier, you’re just arguing that society shouldn’t tax you yet. These arguments are orthogonal, one can admit that paper gains are real wealth while also maintaining that we should only tax realized gains for policy reasons.
Similarly, if my house doubles in value, then I’m richer. It might not be liquid yet, but the bank, the local property tax authority, and my account would absolutely treat me as significantly richer than before.
The issue in the above article isn’t that gains aren’t taxed until after the sale. The issue is that for the ultra wealthy they basically never sell. Instead their stock holdings are used as collateral for low interest debt that finances the lifestyle of these executives. In this case it sure seems like the gains are realized in every way other than for the IRS.
Personally, I’d tax the bejeesus out of this scheme, preferably by counting it as straight up income subject to normal tax rates. Take a salary or sell the stock and pay the gains tax, no other choices.
This isn’t actually an argument against the idea that you’re wealthier, you’re just arguing that society shouldn’t tax you yet. These arguments are orthogonal, one can admit that paper gains are real wealth while also maintaining that we should only tax realized gains for policy reasons.
Similarly, if my house doubles in value, then I’m richer. It might not be liquid yet, but the bank, the local property tax authority, and my account would absolutely treat me as significantly richer than before.
The issue in the above article isn’t that gains aren’t taxed until after the sale. The issue is that for the ultra wealthy they basically never sell. Instead their stock holdings are used as collateral for low interest debt that finances the lifestyle of these executives. In this case it sure seems like the gains are realized in every way other than for the IRS.
Personally, I’d tax the bejeesus out of this scheme, preferably by counting it as straight up income subject to normal tax rates. Take a salary or sell the stock and pay the gains tax, no other choices.
> Your cash in the bank is guaranteed to not be erased tomorrow, up to the FDIC coverage limit.
Until a hyperinflation period hits.
Until a hyperinflation period hits.
So why tax physical property? :)
The way the US taxes physical property based on its current market value is pretty unusual these days, and I'm not sure it's a good idea. It seems to have all kinds of weird distortive effects on the market like encouraging train companies to rip up serviceable track to reduce their tax, incentivizing manufacturers to keep the bare minimum supply of components and materials in stock, and either causing increases in paper wealth due to a house price boom to mean people can no longer afford to keep a roof over their heads or leading to Proposition 13-like measures to prevent this that have their own negative effects. Everyone ultimately seems to pay the price for all these consequences of the US tax structure.
I may be wrong but I don't think the US taxes companies on the value of their inventory.
Why indeed? I think increasing property taxes based on unrealized gains estimated by tax assessors is fundamentally unjust.
Maybe.
This guy Arnold seems to take the position that the ProPublica piece is somehow invalid because…you can’t tax unrealized gains?
1. I don’t understand how the latter follows from the former.
2. Of course you can. Property taxes are just that.
3. Wealth taxes are also just that, though elsewhere in this thread I see Arnold has argued that they aren’t really that.
Whether you should tax unrealized gains is a policy debate, but it’s not an outlandish or ignorant position to say you should—though ProPublica doesn’t say that, so I’m still not sure the relevance.
This guy Arnold seems to take the position that the ProPublica piece is somehow invalid because…you can’t tax unrealized gains?
1. I don’t understand how the latter follows from the former.
2. Of course you can. Property taxes are just that.
3. Wealth taxes are also just that, though elsewhere in this thread I see Arnold has argued that they aren’t really that.
Whether you should tax unrealized gains is a policy debate, but it’s not an outlandish or ignorant position to say you should—though ProPublica doesn’t say that, so I’m still not sure the relevance.
While I disagree that property taxes are unjust, most date back 200+ years to a time when almost all wealth was in the form of land. If a state wanted to tax wealth, they taxed land. (Though this sounds progressive in theory, such taxes were almost universally levied at very low rates. Combined with very low inflation, this meant was it was very easy for the wealthy to accumulate capital by living off the rents of their land.)
yeah not a good rebuttal
>Successful companies induce enormous tax receipts for governments at all levels (corporate taxes, income taxes, property taxes, payroll taxes, headcount taxes, etc). If Bezos is paying less percentage-wise today because he's holding his Amazon stock, where said holding makes Amazon more valuable, that's a good net deal. The alternative world where he’s routinely trimming his shares and thus reducing his economic stake in Amazon's future isn’t really ideal for anyone.
I think my being allowed to pay 0-3% taxes and holdng on to more of the cash I earn would make the world better too and is a good deal. Try using the same logic as this author does with the IRS and see how far it gets you.
>Successful companies induce enormous tax receipts for governments at all levels (corporate taxes, income taxes, property taxes, payroll taxes, headcount taxes, etc). If Bezos is paying less percentage-wise today because he's holding his Amazon stock, where said holding makes Amazon more valuable, that's a good net deal. The alternative world where he’s routinely trimming his shares and thus reducing his economic stake in Amazon's future isn’t really ideal for anyone.
I think my being allowed to pay 0-3% taxes and holdng on to more of the cash I earn would make the world better too and is a good deal. Try using the same logic as this author does with the IRS and see how far it gets you.
>I think my being allowed to pay 0-3% taxes and holdng on to more of the cash I earn would make the world better too and is a good deal.
Except that's not what the author said. You don't earn the cash, see - it's not realized gains.
If you make a cryptocurrency and then get a friend to buy one coin for $10 and now say your cryptocurrency has a market cap of $50,000,000,000, almost all of which you own, you shouldn't get taxed on 50 billion dollar income this year - you should be taxed on the $10 worth you actually sold because that's the cash you earned.
But that $10 plus you making even $1,000,000 in income means you pay taxes at a 0.00000009% rate.
So...yeah. You are allowed to do that, and it will get you far with the IRS.
Except that's not what the author said. You don't earn the cash, see - it's not realized gains.
If you make a cryptocurrency and then get a friend to buy one coin for $10 and now say your cryptocurrency has a market cap of $50,000,000,000, almost all of which you own, you shouldn't get taxed on 50 billion dollar income this year - you should be taxed on the $10 worth you actually sold because that's the cash you earned.
But that $10 plus you making even $1,000,000 in income means you pay taxes at a 0.00000009% rate.
So...yeah. You are allowed to do that, and it will get you far with the IRS.
> And why, exactly, is it apparently reasonable to have sales taxes that don't exceed 12% (disclaimer - in the states, as far as I know); capital gains at 15%; but my income at 25%, 35%, 45%?
Sales taxes tend to be regressive.
Someone making $50K a year pays the same sales tax as someone making $500K.
You're throwing out percentages for income tax, but those are progressive: the 40,000th dollar earned is taxed differently than the 140,000th dollar.
A wealth tax, especially in the US, would go a long was. Something like 2% on net wealth above (e.g.) $500M or $1B would slow inequality; below $10M it'd be 0%, from $10M to $100M it'd be 0.5%, then 1%, then the top rate. See Piketty's book:
* https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
Sales taxes tend to be regressive.
Someone making $50K a year pays the same sales tax as someone making $500K.
You're throwing out percentages for income tax, but those are progressive: the 40,000th dollar earned is taxed differently than the 140,000th dollar.
A wealth tax, especially in the US, would go a long was. Something like 2% on net wealth above (e.g.) $500M or $1B would slow inequality; below $10M it'd be 0%, from $10M to $100M it'd be 0.5%, then 1%, then the top rate. See Piketty's book:
* https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
Or simply tax things based on consumption. But then the tax breaks that each party worked for its citizens (both rich and poor) to not pay income tax goes away as a advantage for the parties.
>It's unfair that they can gain extraordinary amounts of wealth, to such a degree that it's impractical for them to even use, and yet not be taxed on any of it, unrealized or no.
If someone earns a lot of money and just sits on it, they're essentially just reducing the money supply and redistributing purchasing power to other owners of dollar-denominated assets. What is fundamentally "unfair" about this? Why obsess over income inequality if there's admittedly not much consumption inequality? Why is it more "fair" for the government to marshal this purchasing power via taxation than for other holders of cash? Is the implicit assumption here that there's a monotonic relationship between government revenue and fairness?
The article reflects the worst sort of moralized economic illiteracy.
If someone earns a lot of money and just sits on it, they're essentially just reducing the money supply and redistributing purchasing power to other owners of dollar-denominated assets. What is fundamentally "unfair" about this? Why obsess over income inequality if there's admittedly not much consumption inequality? Why is it more "fair" for the government to marshal this purchasing power via taxation than for other holders of cash? Is the implicit assumption here that there's a monotonic relationship between government revenue and fairness?
The article reflects the worst sort of moralized economic illiteracy.
> If you don’t believe, go look at the cover of drudge right now, where he’s using it to go after his favorite target, Elon musk. (making a claim that even the pro Publico article doesn’t make).
Someone else distorting the contents of an article says nothing about the intent of the original author. They’re literally different people, who can be doing different things for different reasons
Someone else distorting the contents of an article says nothing about the intent of the original author. They’re literally different people, who can be doing different things for different reasons
The thing that really needs to be measured here is the real rate of return on these individuals' capital (i.e. post-tax returns) vs economic growth (i.e. growth in wages for ordinary people). The point isn't really about when taxation occurs (I agree this is lazy in the article), it's more that once you factor in taxes (and most serious economists of inequality do this), you end up with more money via returns on wealth than via earning an income. So there's these two concepts, and they are sort of related because they show how the tax regime favors the wealthiest of the wealthy. But the article does a poor job of this.
> the fact that both people earning more than I, and earning less than I pay less in taxes as a percent is incredibly irritating
I understand why it is irritating that those earning more pay a lower tax rate, but why do you find it irritating that those earning less do?
I understand why it is irritating that those earning more pay a lower tax rate, but why do you find it irritating that those earning less do?
PP also failed to disclose that their argument on Musk during 2018 was while Tesla and Musk nearly went bankrupt trying to scale the M3. Not Teslas current state which is dramatically more valuable given that Tesla scaled for the M3 and MY).
That may well be true, but even if Tesla had gone bankrupt in 2018, Elon Musk would still have dramatically more money than you or me. If anything, this highlights how the uber-wealthy are able to make riskier (and, on average, more profitable) investments than you or I in part because the tax system has their back. (To be clear, I wish the article had actually explained all this instead of not mentioning it.)
Yes the rich of today are almost completely sheltered from any risk. At least the royalty and nobility in the past had to fight in wars.
They often avoided having to fight in wars too ;)
On a more serious note, in the past nobility and clergy were often exempt from various taxes (e.g. the taille, the main tax in Ancien Regime France) because of the other "value" they were bringing to society - an argument not dissimilar from those we hear today against various kinds of wealth/capital gains taxes!
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> I think it makes perfect sense for somebody to say that any loan that is backed by stocks granted on the basis of RSU, incur some additional special taxes
Based on the numbers published though, it does not appear like these people are taking out loans with shares as collateral.
E.g. Bezos declared 4.22B in income and paid 973M in tax. This leaves him with more than 3 billions after tax, so I sincerely doubt he also took out a loan.
Based on the numbers published though, it does not appear like these people are taking out loans with shares as collateral.
E.g. Bezos declared 4.22B in income and paid 973M in tax. This leaves him with more than 3 billions after tax, so I sincerely doubt he also took out a loan.
> It’s very clear that the original article was a hit piece/advocacy editorial more than anything else. If you don’t believe, go look at the cover of drudge right now, where he’s using it to go after his favorite target, Elon musk. (making a claim that even the pro Publico article doesn’t make).
Propublica is to gun manufacturers as drudge is to john wilkes booth.
Propublica is to gun manufacturers as drudge is to john wilkes booth.
This is itself misleading.
There are many examples of government in the U.S. taxing unrealized gains. Prime one is property tax.
The author claims:
> most countries use the very sane solution of staggering sales by only imposing a tax when an asset is sold
States and cities right here in the U.S. impose taxes on real estate long before it is sold, regularly assessing its value. Homeowners are indeed forced to sell or mortgage their homes sometimes to pay. In California this laid the groundwork for Prop 13. But property taxes are common globally https://taxfoundation.org/countries-target-property-tax-refo...
Politicians like Elizabeth Warren have proposed a wealth tax to treat stock and other assets more like real estate.
The author seems to strongly imply the US treatment of stock capital gains is some highly rational system designed by deep thinking experts. In reality it is the end point of a long, ad hoc political process, like all our laws.
While I do wish Pro Publica had examined the roots and benefits of our current system as the author suggests, his own post similarly lacks context in the pursuit (IMO) of a buzzy smack down.
There are many examples of government in the U.S. taxing unrealized gains. Prime one is property tax.
The author claims:
> most countries use the very sane solution of staggering sales by only imposing a tax when an asset is sold
States and cities right here in the U.S. impose taxes on real estate long before it is sold, regularly assessing its value. Homeowners are indeed forced to sell or mortgage their homes sometimes to pay. In California this laid the groundwork for Prop 13. But property taxes are common globally https://taxfoundation.org/countries-target-property-tax-refo...
Politicians like Elizabeth Warren have proposed a wealth tax to treat stock and other assets more like real estate.
The author seems to strongly imply the US treatment of stock capital gains is some highly rational system designed by deep thinking experts. In reality it is the end point of a long, ad hoc political process, like all our laws.
While I do wish Pro Publica had examined the roots and benefits of our current system as the author suggests, his own post similarly lacks context in the pursuit (IMO) of a buzzy smack down.
But property taxes aren't a tax on capital gains. In a jurisdiction where property values are regularly reassessed for property tax purposes, they could also go down rather than up, and so the owner's property tax liability could also fall over time. (For example, if there are new negative externalities or just decreased demand for property in that area. Maybe some San Francisco landlords will, for example, pay lower property taxes post-COVID compared to pre-COVID, or paid lower property taxes post-dot-com-crash than pre-dot-com-crash.)
They also aren't a tax on capital gains because there is no form of "basis" for real estate taxes: it doesn't matter for the determination of the tax who the owner is or when the owner bought the property, or, in principle, at what price.
Meanwhile, real estate sales are also subject to capital gains taxes, and I don't think you can detect property tax payments against the capital gain!
I think you made the overall point correctly: in the U.S., ownership of an asset is generally not taxable at all, and therefore unrealized capital gains not only are not taxable but don't affect one's tax liability at all, except for assets whose ownership is itself taxable, which is the rare case rather than the common case today.
They also aren't a tax on capital gains because there is no form of "basis" for real estate taxes: it doesn't matter for the determination of the tax who the owner is or when the owner bought the property, or, in principle, at what price.
Meanwhile, real estate sales are also subject to capital gains taxes, and I don't think you can detect property tax payments against the capital gain!
I think you made the overall point correctly: in the U.S., ownership of an asset is generally not taxable at all, and therefore unrealized capital gains not only are not taxable but don't affect one's tax liability at all, except for assets whose ownership is itself taxable, which is the rare case rather than the common case today.
> But property taxes aren't a tax on capital gains
This is getting tautological though. The point of the ProPublica piece (generously read) is that there’s no reason we have to tax capital gains — or more to the point, wealth broadly — the way we do. And that the article isn’t “wrong” (as the link for this HN post seems to suggest) just because it seems to suggest that reality should perhaps be changed.
Overall you seem to be reading my post as an argument to literally replace capital gains tax with property tax. That’s not the point, the point is there is precedent for taxing assets that have not sold. Issues like how to handle falling asset values under a wealth tax or how a wealth tax would intersect with any remaining capital gains tax would be policy mechanics subject to robust debate IF a decision was made to do a wealth tax.
Update - oh hi Seth we met when you were at Berkeley and made a stand on the loyalty oath. Fan.
This is getting tautological though. The point of the ProPublica piece (generously read) is that there’s no reason we have to tax capital gains — or more to the point, wealth broadly — the way we do. And that the article isn’t “wrong” (as the link for this HN post seems to suggest) just because it seems to suggest that reality should perhaps be changed.
Overall you seem to be reading my post as an argument to literally replace capital gains tax with property tax. That’s not the point, the point is there is precedent for taxing assets that have not sold. Issues like how to handle falling asset values under a wealth tax or how a wealth tax would intersect with any remaining capital gains tax would be policy mechanics subject to robust debate IF a decision was made to do a wealth tax.
Update - oh hi Seth we met when you were at Berkeley and made a stand on the loyalty oath. Fan.
As ProPublica notes, taxation of wealth is rare, but far from unheard of. The historical basis for property taxes (in the 18th century) was that they were the primary source of wealth, so it's somewhat ahistorical for anyone to argue that taxation of "wealth" is novel or radical.
Adam Smith argued for a "land value" tax in "The Wealth of Nations", after all.
I think the ProPublica piece properly points out that such taxes are _unpopular_—justifiably or not; I have noted elsewhere that one of the primary concerns, of capital flight, is probably inapplicable to the US, which already has a global tax on residents and a burdensome reporting requirement in place.
Adam Smith argued for a "land value" tax in "The Wealth of Nations", after all.
I think the ProPublica piece properly points out that such taxes are _unpopular_—justifiably or not; I have noted elsewhere that one of the primary concerns, of capital flight, is probably inapplicable to the US, which already has a global tax on residents and a burdensome reporting requirement in place.
> Prime one is property tax.
Which is a horrendous injustice. I bought my house at a fixed amount. I have no desire or plans to move.
My property taxes have increased by over $3k since I purchased my home, simply due to market conditions. Why should the size of the local municipalities coffers increase, at my expense, relative to the vagaries of the housing market, instead of according to actual budget needs?
I have realized no value whatsoever; if I were to sell my home to try to realize that value, any home I'd buy in the area has similarly risen in price.
The only way for me to realize that "wealth" is to sell my home and significantly downsize, or leave the area entirely, and buy somewhere cheaper.
Which is a horrendous injustice. I bought my house at a fixed amount. I have no desire or plans to move.
My property taxes have increased by over $3k since I purchased my home, simply due to market conditions. Why should the size of the local municipalities coffers increase, at my expense, relative to the vagaries of the housing market, instead of according to actual budget needs?
I have realized no value whatsoever; if I were to sell my home to try to realize that value, any home I'd buy in the area has similarly risen in price.
The only way for me to realize that "wealth" is to sell my home and significantly downsize, or leave the area entirely, and buy somewhere cheaper.
The real horrendous injustice is that when you purchase real estate your payment includes a large unearned increment to the previous owner over what they paid for it. A system where you pay the previous owner only for the value of improvements and make regular ground lease payments to the local municipality (instead of general property taxes) would be more ideal.
Why?
(if your answer is going to include some form of 'but housing is an essential requirement to live', be aware that my next question will be how to differentiate housing from food, or some other essential requirements to living, which are also left to the market to the chagrin of only the most hardcore communist)
(if your answer is going to include some form of 'but housing is an essential requirement to live', be aware that my next question will be how to differentiate housing from food, or some other essential requirements to living, which are also left to the market to the chagrin of only the most hardcore communist)
Sorry, I went to sleep before seeing your reply.
There could be a lot of reasons 'why' but the biggest reason for me is that land/location value usually has nothing to do with the actions of the individual owners. There exists cheap/marginal land that can be had for almost nothing because it either has nothing or is near nothing while there also exists land which is rich in minerals, fertile virgin* cropland or forest, or other natural resources or is is valuable urban land which happens to be located near well paying jobs, good schools, good food, entertainment, accessible open space, or has really good weather or views. As the physical space of varying quality along all these different dimensions is in fixed in supply its price is determined by demand. Oxygen in the air is another "essential requirement to live" but fortunately it cannot be enclosed as easily as land can. Water is already somewhere in between. Land is differentiated from housing, food, and other essentials because there is no work required to produce and distribute it. It just exists and those who happen to own valuable locations are unjustly able to take the economic rent which is the common right of everyone. For a lot of things, you're right, it's often best to leave the production and allocation up to market forces and we end up with an abundance of food and other goods. But there is no real market for land and other natural opportunities because it's not something that can even be produced in the first place.**
Questions to consider:
- When someone claims a house costs more because the weather is mild and temperate (like coastal California), who should be paid for the good weather? Why pay the previous owner?
- When someone claims a house costs more because the local schools are really good, why not pay the municipality more for the schools? Aren't you paying twice by first paying local taxes that fund the schools and then paying the previous owner?
- When someone claims a house costs more because it is on a hillside with a panoramic view of mountains, bridges, bodies of water, and city skylines, who should you pay for the natural topography and shining lights? Why pay the previous owner?
- When someone claims a house costs more because it is near a lot of high paying jobs or is close to shopping, doesn't it seem like a significant amount of profits and wages of the businesses and employees (particularly the least profitable businesses and least paid employees) are being siphoned off to land owners?
- When someone claims a house costs more because it is close to a quality transit station/stop (and other public services) doesn't it seem like you are paying twice to access those services? Once as a fare or usage fee and again as rent or payment to the previous owner?
* land that has never been farmed before or forest that hasn't been logged before as sustainable soil management and forestry do in fact carry a long-term cost for production. Still, there is location value as it relates to climate conditions, access to water, and access to markets for labor, processing, and distribution.
** even landfill (common in parts of the sf bay area, manhattan, and boston) are only done because the /location/ is so valuable that it is worth the cost of filling in with soil moved in from elsewhere. It's less common today not only because of higher costs of dredging and filling but because we also tend to be more aware of the cost of environmental externalities.
There could be a lot of reasons 'why' but the biggest reason for me is that land/location value usually has nothing to do with the actions of the individual owners. There exists cheap/marginal land that can be had for almost nothing because it either has nothing or is near nothing while there also exists land which is rich in minerals, fertile virgin* cropland or forest, or other natural resources or is is valuable urban land which happens to be located near well paying jobs, good schools, good food, entertainment, accessible open space, or has really good weather or views. As the physical space of varying quality along all these different dimensions is in fixed in supply its price is determined by demand. Oxygen in the air is another "essential requirement to live" but fortunately it cannot be enclosed as easily as land can. Water is already somewhere in between. Land is differentiated from housing, food, and other essentials because there is no work required to produce and distribute it. It just exists and those who happen to own valuable locations are unjustly able to take the economic rent which is the common right of everyone. For a lot of things, you're right, it's often best to leave the production and allocation up to market forces and we end up with an abundance of food and other goods. But there is no real market for land and other natural opportunities because it's not something that can even be produced in the first place.**
Questions to consider:
- When someone claims a house costs more because the weather is mild and temperate (like coastal California), who should be paid for the good weather? Why pay the previous owner?
- When someone claims a house costs more because the local schools are really good, why not pay the municipality more for the schools? Aren't you paying twice by first paying local taxes that fund the schools and then paying the previous owner?
- When someone claims a house costs more because it is on a hillside with a panoramic view of mountains, bridges, bodies of water, and city skylines, who should you pay for the natural topography and shining lights? Why pay the previous owner?
- When someone claims a house costs more because it is near a lot of high paying jobs or is close to shopping, doesn't it seem like a significant amount of profits and wages of the businesses and employees (particularly the least profitable businesses and least paid employees) are being siphoned off to land owners?
- When someone claims a house costs more because it is close to a quality transit station/stop (and other public services) doesn't it seem like you are paying twice to access those services? Once as a fare or usage fee and again as rent or payment to the previous owner?
* land that has never been farmed before or forest that hasn't been logged before as sustainable soil management and forestry do in fact carry a long-term cost for production. Still, there is location value as it relates to climate conditions, access to water, and access to markets for labor, processing, and distribution.
** even landfill (common in parts of the sf bay area, manhattan, and boston) are only done because the /location/ is so valuable that it is worth the cost of filling in with soil moved in from elsewhere. It's less common today not only because of higher costs of dredging and filling but because we also tend to be more aware of the cost of environmental externalities.
Presumably, the aggregate effect of local municipalities coffers increases improves the local area, making it more desirable/valuable, which is increased value. You could indeed realise that value: by selling your house and buying one in an area with the same desirability that your current house had when you purchased it.
So you can either hop around similar places and profit, or stay in one place that improves over time, and also pay more taxes over time.
So you can either hop around similar places and profit, or stay in one place that improves over time, and also pay more taxes over time.
Well, no, you could take a reverse mortgage.
The US does substantially favor “primary residences” vs other forms of capital ownership, basically for the reasons you give. Renters, typically, receive fewer such protections (but this depends on the state).
The US does substantially favor “primary residences” vs other forms of capital ownership, basically for the reasons you give. Renters, typically, receive fewer such protections (but this depends on the state).
> Well, no, you could take a reverse mortgage.
Borrowing against a potential future gain is not realizing that gain, and such a loan incurs the risk of losing some (or all) of my equity in the home.
Borrowing against a potential future gain is not realizing that gain, and such a loan incurs the risk of losing some (or all) of my equity in the home.
I’m sorry. Exactly where do “profits” come from if not your equity?
Not sure I follow. My equity is illiquid until I sell the home. I could, in theory, borrow against it, but that carries risk.
> Which is a horrendous injustice.
It's basically feudalism. I'm not against taxes in general, but property tax means you never really own anything.
It's basically feudalism. I'm not against taxes in general, but property tax means you never really own anything.
I think you can make the flip-side argument that private property in land is the least obviously defensible kind of property for people to really own (in an absolute sense), because nobody produced it and there is an inherently fixed amount of it (except for unusual cases like land reclamation).
I remember feeling sympathetic to the argument that property tax means that you don't really own land but just rent it from a state, but if there's a particular kind of thing that you possibly shouldn't really be able to own but should just rent from some institution purportedly representing a community, it now seems like it's more plausible that that should be land, as opposed to movable property, labor, debt, and contractual interests.
I remember feeling sympathetic to the argument that property tax means that you don't really own land but just rent it from a state, but if there's a particular kind of thing that you possibly shouldn't really be able to own but should just rent from some institution purportedly representing a community, it now seems like it's more plausible that that should be land, as opposed to movable property, labor, debt, and contractual interests.
This is the best argument I've seen for property tax, but coupled with a lack of something like UBI it means you can't live a life apart from society. You must always participate in work to justify your continued existence.
You don't ever really own anything. The natural state is that some bandit with more guns comes and takes it from you, and if you want to possess something you better be the bigger bandit.
Feudalism and the modern tax-supported state are two approaches to avoiding constant conflict. With feudalism, the king protects your holdings, and in return you owe him military service to support this protection. With a modern nation-state, the state holds a monopoly on physical violence, and you pay taxes to the state so they can maintain a standing army and legal system to enforce your property rights.
Debates over which form of taxation is best are better framed in economic terms rather than moral terms. Which forms of taxation encourage beneficial pro-social behavior and discourage anti-social behavior? There's a good argument that wealth taxes (particularly when taxing natural resources like land, data, the electromagnetic spectrum, CO2 emissions, or pollution) are much more effective at this than income taxes.
Feudalism and the modern tax-supported state are two approaches to avoiding constant conflict. With feudalism, the king protects your holdings, and in return you owe him military service to support this protection. With a modern nation-state, the state holds a monopoly on physical violence, and you pay taxes to the state so they can maintain a standing army and legal system to enforce your property rights.
Debates over which form of taxation is best are better framed in economic terms rather than moral terms. Which forms of taxation encourage beneficial pro-social behavior and discourage anti-social behavior? There's a good argument that wealth taxes (particularly when taxing natural resources like land, data, the electromagnetic spectrum, CO2 emissions, or pollution) are much more effective at this than income taxes.
Yes, and:
> Debates over which form of taxation is best are better framed...
Discuss whole systems. Piecemeal is how these messes are created.
I no longer care what any one opposes. Yes, yes, yes, everything sucks. We know. WE KNOW.
I want to hear solutions, not complaints.
> Debates over which form of taxation is best are better framed...
Discuss whole systems. Piecemeal is how these messes are created.
I no longer care what any one opposes. Yes, yes, yes, everything sucks. We know. WE KNOW.
I want to hear solutions, not complaints.
They don't change to the whims of the market, they change to the whims of the government.
What is growing is the government expenditures.
What is growing is the government expenditures.
> I don’t think anyone involved at ProPublica knows what tax avoidance means
Just because something is not legally tax avoidance does not mean that it should not be.
> I don’t think anyone involved at ProPublica grasps why virtually all developed countries don’t tax unrealized capital gains
Again... whether we do or don't is not related to whether we should or shouldn't.
> I don’t think anyone involved at ProPublica tried very hard (at all?) to learn about what they didn’t know before publishing this piece
Sure.
> I don’t think anyone involved at ProPublica gave nearly enough thought to the implications of violating privacy laws (or at least norms) to publish a non-story
Or perhaps this is truly a societal issue, as evidenced by the wide difference between the current amount of taxes which the wealthy pay, and the historical amount; and as evidenced by the wide difference between different countries. The fact that it has long been a part of the public discourse suggests so.
And none of that explains how it is "misleading".
Edit/PS: https://www.propublica.org/article/why-we-are-publishing-the... but sure, tell me how they didn't give "nearly enough thought to the implications of violating privacy norms"
Just because something is not legally tax avoidance does not mean that it should not be.
> I don’t think anyone involved at ProPublica grasps why virtually all developed countries don’t tax unrealized capital gains
Again... whether we do or don't is not related to whether we should or shouldn't.
> I don’t think anyone involved at ProPublica tried very hard (at all?) to learn about what they didn’t know before publishing this piece
Sure.
> I don’t think anyone involved at ProPublica gave nearly enough thought to the implications of violating privacy laws (or at least norms) to publish a non-story
Or perhaps this is truly a societal issue, as evidenced by the wide difference between the current amount of taxes which the wealthy pay, and the historical amount; and as evidenced by the wide difference between different countries. The fact that it has long been a part of the public discourse suggests so.
And none of that explains how it is "misleading".
Edit/PS: https://www.propublica.org/article/why-we-are-publishing-the... but sure, tell me how they didn't give "nearly enough thought to the implications of violating privacy norms"
> Just because something is not legally tax avoidance does not mean that it should not be.
I think this author would agree with you on this point and indeed most of your points. I think it could perhaps worth considering this author's point - understanding something about the systems being criticized is important because it guides people to good critique.
If ProPublica is indeed writing from a position of gross ignorance on the subject they are writing about, this should be understood by the readers and color how the story is read. Much as we here on HN are likely to find it salient if someone with thoughts to share on programming languages knew very little about computing.
I think this author would agree with you on this point and indeed most of your points. I think it could perhaps worth considering this author's point - understanding something about the systems being criticized is important because it guides people to good critique.
If ProPublica is indeed writing from a position of gross ignorance on the subject they are writing about, this should be understood by the readers and color how the story is read. Much as we here on HN are likely to find it salient if someone with thoughts to share on programming languages knew very little about computing.
From TFA:
> But even there either the heirs are withdrawing money to spend or they aren’t. If they are, it gets taxed.
Under current US tax law, the heirs are inheriting the assets on a "stepped-up" value basis, i.e., any gains realized BEFORE they inherited the assets are NEVER taxed.
The fact that this detail is not mentioned once in the article means that the author either is not as knowledgeable about finance as they present themselves, or they are, themselves, trying to sell a "BS Tax Story".
> But even there either the heirs are withdrawing money to spend or they aren’t. If they are, it gets taxed.
Under current US tax law, the heirs are inheriting the assets on a "stepped-up" value basis, i.e., any gains realized BEFORE they inherited the assets are NEVER taxed.
The fact that this detail is not mentioned once in the article means that the author either is not as knowledgeable about finance as they present themselves, or they are, themselves, trying to sell a "BS Tax Story".
OP here. ProPublica made the same argument. Maybe I should have covered it.
Here's why that step-up doesn't really matter. For round numbers, let's imagine Bezos acquires shares of Amazon at $1 each. Fast forward a few decades and they're now worth $100 each. He's accrued $99 in taxable gains. But he blows up in space, so it's all left for heirs. At transfer, the cap gains part is thrown away. But this is only to avoid double taxation, as the heirs now pay 40% on current market value for assets > $1m. Making them pay 20% CG on $99 and 40% would be far too high. So the gov lets them only pay 40% on ~$100, which is roughly 2x the total receipts.
(If the assets are left in trust, you can avoid the estate taxes. But then you're back to paying cap gains when the money is withdrawn.)
EDIT: Technically it's assets over $1m + other exemptions and deductions. In practice it kicks in more like $10-12m depending on particulars. But the amounts in question here are way, way above that baseline.
Here's why that step-up doesn't really matter. For round numbers, let's imagine Bezos acquires shares of Amazon at $1 each. Fast forward a few decades and they're now worth $100 each. He's accrued $99 in taxable gains. But he blows up in space, so it's all left for heirs. At transfer, the cap gains part is thrown away. But this is only to avoid double taxation, as the heirs now pay 40% on current market value for assets > $1m. Making them pay 20% CG on $99 and 40% would be far too high. So the gov lets them only pay 40% on ~$100, which is roughly 2x the total receipts.
(If the assets are left in trust, you can avoid the estate taxes. But then you're back to paying cap gains when the money is withdrawn.)
EDIT: Technically it's assets over $1m + other exemptions and deductions. In practice it kicks in more like $10-12m depending on particulars. But the amounts in question here are way, way above that baseline.
You say that would be double taxation, but that's only because bezos avoided taxation entirely on that appreciation while alive, a nice perk the vast majority don't get. So really with the most modest reform you tax the appreciation 20% cg then estate tax on the remainder. Considering all that appreciation compounded without tax for years, they still make out astoundingly well
I think this is the right analysis. If Bezos has sold all that stock the day before he died, he would have owed capital gains on it and the remainder would be inherited. That's roughly the same situation as described with the liquidity event moved a few days yet it's not "double taxation".
No that’s just bad estate planning… kind of like how a pair of rich siblings could gift each other $1 million and it would be taxed as income for both despite neither experiencing any change in wealth. Income taxation is impossible to implement without logical inconsistencies.
> how a pair of rich siblings could gift each other $1 million and it would be taxed as income for both despite neither experiencing any change in wealth
No. Gift taxes are paid by the gifter. Gifts are not income for the recipient. Additionally, there are annual and lifetime exclusions for gift tax.
No. Gift taxes are paid by the gifter. Gifts are not income for the recipient. Additionally, there are annual and lifetime exclusions for gift tax.
> Gifts are not income for the recipient.
They manifestly are income for the recipient.
They aren't taxed as such, though, because undertaxing income through generational wealth transfer is how you preserve a privileged elite.
> Additionally, there are annual and lifetime exclusions for gift tax.
The annual per-recipient limits are large, only amounts over them count against the lifetime limit, and the lifetime limit is enormous.
They manifestly are income for the recipient.
They aren't taxed as such, though, because undertaxing income through generational wealth transfer is how you preserve a privileged elite.
> Additionally, there are annual and lifetime exclusions for gift tax.
The annual per-recipient limits are large, only amounts over them count against the lifetime limit, and the lifetime limit is enormous.
Yeah as soon as I wrote that I looked at the gift tax rules and shrugged. Either way, both gifts are being “taxed” although the arcane gift tax rules seem to imply that no actual tax will be paid unless and until one of them reaches the lifetime threshold of ~$11M.
Moreover, if Bezos had earned that as income instead of capital gains, it would have been “doubly taxed” upon inheritance; in effect, this rule (as with many others) merely excludes capital gains from taxes that apply to earned income.
The argument that the step up basis avoids double taxation appears to be slight of hand. By the same rationale, you should earn a tax credit for sales taxes paid during the tax year.
The argument that the step up basis avoids double taxation appears to be slight of hand. By the same rationale, you should earn a tax credit for sales taxes paid during the tax year.
Of course it's double taxation.
The offset, such as it is, is that estates below a certain threshold pay a lower rate of 18%. So the tax was designed to make the wealthy pay more, irrespective of whether it does a good enough job there.
But to be clear, if someone wants to argue for say a 45-50% estate tax (or even a higher CG rate), that's fine! My point in the article was just that this should be done as an oped, not a faux-bombshell news feature.
But to be clear, if someone wants to argue for say a 45-50% estate tax (or even a higher CG rate), that's fine! My point in the article was just that this should be done as an oped, not a faux-bombshell news feature.
To me this read like "avoiding taxation" == "refusing to realize significant proportions of one's gains". I don't see anything wrong with that. We all do it (if we aspire to financial independence).
But capital gains are usually on purchase price vs sale price. If you paid 20% cg on inheritance, presumable the purchase price would change/reset the the value on that date?
Bezos didn't avoid CG, he deferred it. By not paying CG, he also didn't cash out, meaning to cash out the inheritor will have to pay all the CG Bezos would have paid? i.e Bezos full tax amount on stock was deferred to the inheritor. Unless they get to dispose / realise gains on those stocks for only 40% - but I read it as they receive the unrealised stocks, and need to pay 40% tax to do so.
Bezos didn't avoid CG, he deferred it. By not paying CG, he also didn't cash out, meaning to cash out the inheritor will have to pay all the CG Bezos would have paid? i.e Bezos full tax amount on stock was deferred to the inheritor. Unless they get to dispose / realise gains on those stocks for only 40% - but I read it as they receive the unrealised stocks, and need to pay 40% tax to do so.
>You say that would be double taxation, but that's only because bezos avoided taxation entirely on that appreciation while alive, a nice perk the vast majority don't get.
Isn't this pretty easy to pull off? Just buy a home (most americans own their home), and get a reverse mortgage when you're retired.
Isn't this pretty easy to pull off? Just buy a home (most americans own their home), and get a reverse mortgage when you're retired.
[deleted]
I read several of your articles to decide whether your Substack presents new facts or analysis. It does not. Your writing triggers many of the heuristics I use to filter "industry flack" from genuine dissent.
Tax policy isn't something I know a lot about, so I'll discuss your article "Breaking Down the New Yorker's Slanted Robinhood Story".
> "Brokers by definition are middlemen who have customers on both sides. And if we have to pick the side that matters more to Robinhood, it’s obviously retail customers. To suggest otherwise is either disingenuous or negligently ignorant."
Channeling my inner Antonin Scalia here. The Cambridge English dictionary defines a customer as "a person who buys goods or a service." There is a perfectly reasonable argument that Robinhood users are not customers at all, let alone Robinhood's primary customers. It's not a good look to dismiss the plausible as "disingenuous or negligently ignorant". That's a symptom of ideological conflict, which is dull and tiresome.
> "Payment for order flow is something that it seems only one financial journalist understands well enough to explain"
I see a trend here. People who disagree with you are ignorant or lying. It's not difficult to understand that PFOF entails selling user orders to brokers under common control with enormous asset managers that hoard advertising data and make market-moving trades. Questioning the intelligence of those who disagree is another symptom of ideological conflict.
> "Did stock markets haemorrhage value in 2007-2008? Famously so. But the causes there were complex. Was excessive Wall Street greed a part of it? Sure! But so were a lot of other elements — including weak consumer financial education."
With all due respect, that sounds like some sleezy shit Anthony Mozilo might say. I want to give you the benefit of the doubt, but it's hard to see this as anything but pandering to one side of an ideological conflict.
Tax policy isn't something I know a lot about, so I'll discuss your article "Breaking Down the New Yorker's Slanted Robinhood Story".
> "Brokers by definition are middlemen who have customers on both sides. And if we have to pick the side that matters more to Robinhood, it’s obviously retail customers. To suggest otherwise is either disingenuous or negligently ignorant."
Channeling my inner Antonin Scalia here. The Cambridge English dictionary defines a customer as "a person who buys goods or a service." There is a perfectly reasonable argument that Robinhood users are not customers at all, let alone Robinhood's primary customers. It's not a good look to dismiss the plausible as "disingenuous or negligently ignorant". That's a symptom of ideological conflict, which is dull and tiresome.
> "Payment for order flow is something that it seems only one financial journalist understands well enough to explain"
I see a trend here. People who disagree with you are ignorant or lying. It's not difficult to understand that PFOF entails selling user orders to brokers under common control with enormous asset managers that hoard advertising data and make market-moving trades. Questioning the intelligence of those who disagree is another symptom of ideological conflict.
> "Did stock markets haemorrhage value in 2007-2008? Famously so. But the causes there were complex. Was excessive Wall Street greed a part of it? Sure! But so were a lot of other elements — including weak consumer financial education."
With all due respect, that sounds like some sleezy shit Anthony Mozilo might say. I want to give you the benefit of the doubt, but it's hard to see this as anything but pandering to one side of an ideological conflict.
Just to start with one thing here, you're arguing that Robinhood's retail customers are not in fact actual customers despite the fact they very obviously meet the definition you use? lol ok
When PFOF is involved, what does a Robinhood user buy from Robinhood?
>Channeling my inner Antonin Scalia here. The Cambridge English dictionary defines a customer as "a person who buys goods or a service." There is a perfectly reasonable argument that Robinhood users are not customers at all, let alone Robinhood's primary customers.
I'm not following this. Are robinhood customers not buying stocks from them? Are stocks not "goods or a service"?
>It's not difficult to understand that PFOF entails selling user orders to brokers under common control with enormous asset managers that hoard advertising data and make market-moving trades.
You seem to be beating around the bush here. What nefarious activity are you suggesting they're doing? Front running? Because that's explicitly illegal.
>I see a trend here. People who disagree with you are ignorant or lying.
>[...] but it's hard to see this as anything but pandering to one side of an ideological conflict.
I hope you see the irony here.
I'm not following this. Are robinhood customers not buying stocks from them? Are stocks not "goods or a service"?
>It's not difficult to understand that PFOF entails selling user orders to brokers under common control with enormous asset managers that hoard advertising data and make market-moving trades.
You seem to be beating around the bush here. What nefarious activity are you suggesting they're doing? Front running? Because that's explicitly illegal.
>I see a trend here. People who disagree with you are ignorant or lying.
>[...] but it's hard to see this as anything but pandering to one side of an ideological conflict.
I hope you see the irony here.
> Are robinhood customers not buying stocks from them? Are stocks not "goods or a service"?
When PFOF is involved, Robinhood users do not buy stocks from Robinhood. They buy them from the Robinhood customer who buys order flow.
> What nefarious activity are you suggesting they're doing?
I pointed out a troubling conflict of interest and a potential ability to act on that conflict in a legally ambiguous manner. For what it's worth, one of Robinhood's customers was recently sanctioned for old-timey tradeahead front running.
> I hope you see the irony here.
I don't see the irony. Can you explain it to me? I was trying to be opinionated, but intellectually honest. Did I fail?
When PFOF is involved, Robinhood users do not buy stocks from Robinhood. They buy them from the Robinhood customer who buys order flow.
> What nefarious activity are you suggesting they're doing?
I pointed out a troubling conflict of interest and a potential ability to act on that conflict in a legally ambiguous manner. For what it's worth, one of Robinhood's customers was recently sanctioned for old-timey tradeahead front running.
> I hope you see the irony here.
I don't see the irony. Can you explain it to me? I was trying to be opinionated, but intellectually honest. Did I fail?
> Making them pay 20% CG on $99 and 40% would be far too high.
I don't agree with this and I doubt many other people do either. I'm fine with them paying 20% on $99 and then 40% of 80.20/share they inherit. Due to multiplying percentages, that's only a 51.88% rate.
Of course, you're ignoring a lot when you say "other exemptions". Like the first 5.35 million to each descendant being a "gift" before the estate tax is applied.
I don't agree with this and I doubt many other people do either. I'm fine with them paying 20% on $99 and then 40% of 80.20/share they inherit. Due to multiplying percentages, that's only a 51.88% rate.
Of course, you're ignoring a lot when you say "other exemptions". Like the first 5.35 million to each descendant being a "gift" before the estate tax is applied.
I'm not sure where the advantage is there. When you're talking about significant inheritances (like, $25m and beyond) the estate tax on the stock is going to be more expensive than it would've been to just pay the un-steppedup capital gains. Unless maybe there's workarounds to avoid estate taxes?
Isn't the basis stepped up after estate tax is paid? So if you die holding stock no tax is avoided.
any capital asset is stepped up currently.
https://www.kiplinger.com/retirement/estate-planning/602701/...
https://www.kiplinger.com/retirement/estate-planning/602701/...
> are NEVER taxed
You still pay the estate tax (40%), even with the stepped up gains.
Biden's plan is to pay income tax on the gains, and then the estate tax on the rest. Or vice versa, the news reporting on this has been deficient.
You still pay the estate tax (40%), even with the stepped up gains.
Biden's plan is to pay income tax on the gains, and then the estate tax on the rest. Or vice versa, the news reporting on this has been deficient.
A couple of questions I would love to see some info on:
1) if somebody actually sold say 100M in stock at long term cap gains rates they should be paying roughly 15% tax, but in these cases people paid far lower than 15%, so they must offset those gains with something — what was it?
2) borrowing say 100M and using their large qty of stock as collateral at say 2% interest rate means you can buy stuff with that money then they pay it back later, but how? If they sell stock to pay it back later, then in that year they should have to pay tax in that year.. so ultimately the cash flow needs to be tracked.. if somebody buys a sports team for 2B, where did they get the cash for that? Did they buy it by paying the person in stock?
Would be great to understand how people are doing this kind of stuff because it seems like the old line about “not taxing the job creators” translating to somebody only paying 1% tax might be fine if that was the societal trade we are making but if that person is not actually benefiting society in any way, then that person paying ultra low taxes does seem unfair.
1) if somebody actually sold say 100M in stock at long term cap gains rates they should be paying roughly 15% tax, but in these cases people paid far lower than 15%, so they must offset those gains with something — what was it?
2) borrowing say 100M and using their large qty of stock as collateral at say 2% interest rate means you can buy stuff with that money then they pay it back later, but how? If they sell stock to pay it back later, then in that year they should have to pay tax in that year.. so ultimately the cash flow needs to be tracked.. if somebody buys a sports team for 2B, where did they get the cash for that? Did they buy it by paying the person in stock?
Would be great to understand how people are doing this kind of stuff because it seems like the old line about “not taxing the job creators” translating to somebody only paying 1% tax might be fine if that was the societal trade we are making but if that person is not actually benefiting society in any way, then that person paying ultra low taxes does seem unfair.
but in these cases people paid far lower than 15%, so they must offset those gains with something — what was it?
Be careful. ProPublica is conflating "wealth gain", aka unrealized, unsold stock gains, with income and actual capital gains.
ultrawealthy typically hold fast to shares in the companies they’ve founded. Many titans of the 21st century sit on mountains of what are known as unrealized gains, the total size of which fluctuates each day as stock prices rise and fall. Of the $4.25 trillion in wealth held by U.S. billionaires, some $2.7 trillion is unrealized
Be careful. ProPublica is conflating "wealth gain", aka unrealized, unsold stock gains, with income and actual capital gains.
ultrawealthy typically hold fast to shares in the companies they’ve founded. Many titans of the 21st century sit on mountains of what are known as unrealized gains, the total size of which fluctuates each day as stock prices rise and fall. Of the $4.25 trillion in wealth held by U.S. billionaires, some $2.7 trillion is unrealized
100% agree that propublica didn’t do a good job, but the question remains, if somebody makes the claim that some billionaire sold some stock at long term gain prices, then in at least some tax year you would expect that massive amount of money to dwarf any losses they had, so if they truly paid long term cap gains then in one particular year their tax rate should be close to 15%. But if it’s not over long periods of time, then they have some massive method of offsetting gains. People saying “oh but they pay capital gains” or “oh they offset with losses” doesn’t make any actual sense if the numbers are huge. Like imagine some billionaire explaining to his buddy, “yea I didn’t pay any tax on the 1B in stock I sold last year because I offsetted the gains with 150M in losses rather than paying the taxes, aren’t you impressed?” Its like huh? It seems like way more likely the “losses” are actually paper losses like a building cost depreciating in value “supposedly” but actually it does not depreciate like that in reality.. so it would be great to see how this stuff works over some period of time rather than just in random one off cases.
Maybe the trick is simply just borrow for your whole life then when you die pay back the loans but somehow that payback process results in limited taxes somehow.
Maybe the trick is simply just borrow for your whole life then when you die pay back the loans but somehow that payback process results in limited taxes somehow.
If you look at the table with 4 billionaires in the propublica article, 3 of the 4 (Bezos, Musk, and Buffett) paid tax rates of over 20% of their reported income, consistent with the 15% long term capital gain rate.
> Maybe the trick is simply just borrow for your whole life then when you die pay back the loans but somehow that payback process results in limited taxes somehow.
The ‘somehow’ is the stepped up basis upon death loophole: https://www.thebalance.com/how-the-stepped-up-basis-loophole...
The cost basis of an asset when inherited is set to the value on the day the owner died.
The ‘somehow’ is the stepped up basis upon death loophole: https://www.thebalance.com/how-the-stepped-up-basis-loophole...
The cost basis of an asset when inherited is set to the value on the day the owner died.
OP here. Can give some partial answers.
1. Lots of possible deductions. Charitable giving is a big one here. I guess we'll see from future instalments in the ProPublica series which ones were specifically used.
2. You can roll-over loans by borrowing new money to pay back old debt, up to a practical cap of a max % of collateralized share value. And this is worth it if the expected growth on your shares is higher than interest on the loans. But at some point you or an heir will have to realize gains if you want to exceed that practical cap -- or if the loans get called. Bezos could probably raise $2bn for a sports franchise on loan no problem coz that's only ~1% of his shares. If you're a regular billionaire with say $4-5bn in shares, much harder.
The meta point here though is that the taxes are always going to be paid at some point, and deferring that point to the future is fine if the rate of growth on the gov's share exceeds their borrowing costs (currently between 0-2% depending how you look at it).
1. Lots of possible deductions. Charitable giving is a big one here. I guess we'll see from future instalments in the ProPublica series which ones were specifically used.
2. You can roll-over loans by borrowing new money to pay back old debt, up to a practical cap of a max % of collateralized share value. And this is worth it if the expected growth on your shares is higher than interest on the loans. But at some point you or an heir will have to realize gains if you want to exceed that practical cap -- or if the loans get called. Bezos could probably raise $2bn for a sports franchise on loan no problem coz that's only ~1% of his shares. If you're a regular billionaire with say $4-5bn in shares, much harder.
The meta point here though is that the taxes are always going to be paid at some point, and deferring that point to the future is fine if the rate of growth on the gov's share exceeds their borrowing costs (currently between 0-2% depending how you look at it).
Haven’t there been tax holidays in the past where gains can be realized at a much lower rate so with this level of wealth it is worth putting it off just in case one of those rolls around again?
(Or is that just an urban legend I’ve been told?)
(Or is that just an urban legend I’ve been told?)
I know they happen for offshore wealth getting repatriated. Possible that they've existed for onshore too? Interesting thing to look into. But even if so, that just seems a vanilla case of "Congress should be held accountable to not give away the farm", as it would be a pretty perverse incentive if the rich felt that such a holiday were likely to arise.
The rich can pay for such a holiday
Yeah, there's a definite asymmetry between billionaires with 30-50 year horizons and politicians worrying about 4-8 years.
https://www.nytimes.com/2018/01/17/technology/apple-tax-bill...
Not for individuals, but when you are a high net worth individual, it's all the same.
Not for individuals, but when you are a high net worth individual, it's all the same.
You criticize PP for shallow analysis but your analysis of GRATs, GRUTs, and similar estate tax avoidance strategies is even more superficial and conclusory.
Most of those instruments retain the initial cost basis. They're a way of getting around gift taxes, not capital gains.
In grantor trusts, transactions between the grantor and the trust are disregarded. So at the end of the trust term the grantor can buy back the appreciated assets and substitute cash in the trust vehicle. That cash (assuming a zeroed out GRAT) represents the delta between the conservative IRS assumed rate and the actual appreciation, passes to heirs gift tax free, and with no embedded capital gains basis.
Again, if you are going to throw punches you ought to make really sure you’ve done your own homework.
Again, if you are going to throw punches you ought to make really sure you’ve done your own homework.
We'll start with the meta here. Some of these vehicles have arcane applications that I wouldn't know about. I'm not a CPA, and I pay people for corrections for a reason (which I'm pretty sure I'm about the only person on the internet who does this). If you can demonstrate to me that I've missed something meaningful here, I'm happy to pay off and revise/note my piece accordingly.
As for the concrete, the important thing here is whether those repurchased shares retain their original cost basis or not (to the grantor) from the IRS's POV. If they do, all that's happened is a complicated tax-free cash transfer. If they don't, then cap gains taxes have been avoided.
So far as I understand the rules, it's the former. If I'm wrong, I'm happy to be pointed to a credible source etc.
As for the concrete, the important thing here is whether those repurchased shares retain their original cost basis or not (to the grantor) from the IRS's POV. If they do, all that's happened is a complicated tax-free cash transfer. If they don't, then cap gains taxes have been avoided.
So far as I understand the rules, it's the former. If I'm wrong, I'm happy to be pointed to a credible source etc.
If you die with $100m of stock and $10m in loans, you pay estate taxes on $90m of net assets and $0 of capital gains (your heirs get a step-up in basis on death). If you die with $90m of stock because you sold $10m of it for consumption, you pay the same estate taxes and additional capital gains on the sale.
In short, the estate pays off the loans by selling stock immediately after death.
In short, the estate pays off the loans by selling stock immediately after death.
An interesting (and probably obvious to most) thing mentioned in the propublica articles is that Bezos used investment losses to offset some of the realized capital gains. As in he was able to make speculative bets on startups with no downside risk because he could either gain spectacular appreciation on the ones that hit or use the failures to offset his expenses (realized gains).
Writing off investment losses does not eliminate or even reduce the risk! It avoids you paying taxes on money you didn't actually earn.
Our income/gains taxes avoid confiscating your (hopefully productive!) property by only taxing you on the profits you realize, which both enables and encourages you to keep up what you're doing, producing more prosperity for yourself, your community, and tax income for the government. It doesn't reward you for taking risks, but it doesn't punish you for taking them either. If you take a risk, lose money, and still get taxed on that money you're getting punished for taking a risk.
Our income/gains taxes avoid confiscating your (hopefully productive!) property by only taxing you on the profits you realize, which both enables and encourages you to keep up what you're doing, producing more prosperity for yourself, your community, and tax income for the government. It doesn't reward you for taking risks, but it doesn't punish you for taking them either. If you take a risk, lose money, and still get taxed on that money you're getting punished for taking a risk.
Yes, but when you're filthy rich and sit on a mountain of unrealized gains you get to be selective about how much you pull out. You can invest 100 million in startups knowing that most of it will go to 0, allowing you to later offset anything that you cash out with losses.
Would you pay $20 bucks now to offset paying tax on a future $20 bucks? There's no way to come out ahead just by failing, that scheme only minimizes risk.
Yes and? The losses are no less real! You're still much better not having them.
But the losses have a chance of being a big win. It's kind of like getting a big discount on lottery tickets.
And your winning investments had a chance of being a failure, yet you still pay full taxes on their gains.
Imagine you believe that a stock will stay at the same price, so you make an investment that loses money if it goes up and gains if it goes down, and another that moves in the opposite direction. So the two largely cancel out and you make a bit of profit if it stays the same as you expect.
What should you pay taxes on? The amount you actually made or the 'virtual money' that flowed through only to be canceled out on the other side?
Our income and gains taxes are intended to tax you on just what you actually gained, after taking out costs (including the costs of the other investments you made that didn't pan out).
Imagine you believe that a stock will stay at the same price, so you make an investment that loses money if it goes up and gains if it goes down, and another that moves in the opposite direction. So the two largely cancel out and you make a bit of profit if it stays the same as you expect.
What should you pay taxes on? The amount you actually made or the 'virtual money' that flowed through only to be canceled out on the other side?
Our income and gains taxes are intended to tax you on just what you actually gained, after taking out costs (including the costs of the other investments you made that didn't pan out).
Bezos and other rich people are sitting billions of unrealized gains.
1. Bezos gets lucky and turns $100 of founder shares into $100 billion of unrealized gains.
2. Bezos goes to the bank and gets a loan for $500 million to invest in a diverse portfolio of early stage startups knowing that only a tiny fraction of them will account for majority of his returns.
3. Every year a portion of his portfolio fails, allowing him to sell a portion of his original shares to offset the losses and show a net gain of 0, allowing him to pay no taxes.
4. He hits a Google or Uber and 10xes the original $500mil but gets to continue this scheme of not realizing the gains unless he has losses to match while his control of the universe continues to expand.
https://startupflux.com/jeff-bezos-investment-portfolio-owns...
"Jeff Bezos Investment Portfolio is very large and diverse. he owns a stake in several Very Very large companies that you’ll be surprised to hear. Bezos was one of the first shareholders in Google, when he invested $250,000 in 1998. That $250,000 investment resulted in 3.3 million shares of Google stock worth about $3.1 billion today."
1. Bezos gets lucky and turns $100 of founder shares into $100 billion of unrealized gains.
2. Bezos goes to the bank and gets a loan for $500 million to invest in a diverse portfolio of early stage startups knowing that only a tiny fraction of them will account for majority of his returns.
3. Every year a portion of his portfolio fails, allowing him to sell a portion of his original shares to offset the losses and show a net gain of 0, allowing him to pay no taxes.
4. He hits a Google or Uber and 10xes the original $500mil but gets to continue this scheme of not realizing the gains unless he has losses to match while his control of the universe continues to expand.
https://startupflux.com/jeff-bezos-investment-portfolio-owns...
"Jeff Bezos Investment Portfolio is very large and diverse. he owns a stake in several Very Very large companies that you’ll be surprised to hear. Bezos was one of the first shareholders in Google, when he invested $250,000 in 1998. That $250,000 investment resulted in 3.3 million shares of Google stock worth about $3.1 billion today."
And that's a bad thing?
AFAICT, the main objection is he has an obscene amount of money (which fair enough, he does). I'm not sure what your objection to this scheme is in general.
Would you still object if a small business owner did the same thing (which I'm pretty sure is common, just not with startups)?
AFAICT, the main objection is he has an obscene amount of money (which fair enough, he does). I'm not sure what your objection to this scheme is in general.
Would you still object if a small business owner did the same thing (which I'm pretty sure is common, just not with startups)?
He is not objecting it.
> his control of the universe continues to expand
presumably because he's disproportionately funding "the universe"? All that money on failing start-ups probably lose him more than whatever the stock-disposal tax rate is. What isn't going to the government is directly seeding the economy.
The 10x payoff is taxed. You seem to assume that would still have happened anyway - who would have funded it? Bezos investing in a portfolio created that wealth.
Assume he breaks even: He had to burn through 10$X in order to have $X shares in that 10x company. The tax he would* have paid if not offset against losses, is the same he pays on the unicorn. i.e He gets credited tax on the 10$X, but pays tax on $(10X).
presumably because he's disproportionately funding "the universe"? All that money on failing start-ups probably lose him more than whatever the stock-disposal tax rate is. What isn't going to the government is directly seeding the economy.
The 10x payoff is taxed. You seem to assume that would still have happened anyway - who would have funded it? Bezos investing in a portfolio created that wealth.
Assume he breaks even: He had to burn through 10$X in order to have $X shares in that 10x company. The tax he would* have paid if not offset against losses, is the same he pays on the unicorn. i.e He gets credited tax on the 10$X, but pays tax on $(10X).
Except, if you get a big win, you can't offset that win against gains, and in fact have to pay tax on that win. Also, a big discount is only a big discount if it differs from the norm: infact anyone is allowed to offset their losses.
Yes, maybe only billionaires have the capital to make this bet less volatile, but such is as with all things: It's generally easier to turn larger amounts of money into more money as high-capital-requirement opportunities become available to you (not just relating to this), they have still have to have large amounts of capital, and put it at risk i.e more to lose.
Yes, maybe only billionaires have the capital to make this bet less volatile, but such is as with all things: It's generally easier to turn larger amounts of money into more money as high-capital-requirement opportunities become available to you (not just relating to this), they have still have to have large amounts of capital, and put it at risk i.e more to lose.
The effective risk is reduced but not zero. If you lose money investing in a failed startup you're still financially worse off even after accounting for the capital gains offset.
The math doesn’t work out here. If you lose $100 on an investment, and your tax rate is 15%, the write-off only saves you $15 in taxes. You are still out $85 compared to not having made that investment.
I'm sitting on billions of capital gains and invest 20mil a pop in a diversified portfolio of startups like uber, theranos, juicero, etc. 4 years later my shares of uber are worth a billion dollars and the rest of my portfolio goes to 0, so as a recently divorced old balding man I sell enough shares to match my losses and buy a $175mil mansion and a yacht for my yacht. My net long term capital gains for the year is 0 so I pay no taxes.
The point is, you start from a $100 initial investment that has already turned into 100s of billions of dollars of unrealized gains which you can now selectively live off of without paying a dime in taxes by harvesting losses.
The point is, you start from a $100 initial investment that has already turned into 100s of billions of dollars of unrealized gains which you can now selectively live off of without paying a dime in taxes by harvesting losses.
>I sell enough shares to match my losses and buy a $175mil mansion
If you had $175M to buy a mansion and paid $0 tax, you must have had $175M of losses as well. To have $175M of losses, you had to have paid $175M for those Theranos and Juicero shares. So you already had $175M sitting around in your bank account a few years ago. You could have just left it there and bought your mansion now. Your scheme gained you nothing, in fact you are worse off because you had to sell $175M of your Uber shares, which you wouldn't have had to sell if you had just kept your $175M in your bank account rather than investing in Juicero and Theranos.
My point is that the $175M you had in your bank account years ago was already realized and fully taxed because it was cash. So being able to spend it on a mansion is fair because it's already fully taxed. You used it up on your mansion and cannot spend it on anything else. If you want to buy a second mansion you'll have to find some new fully taxed money (such as sell more Uber shares and actually pay capital gains tax on them).
If you had $175M to buy a mansion and paid $0 tax, you must have had $175M of losses as well. To have $175M of losses, you had to have paid $175M for those Theranos and Juicero shares. So you already had $175M sitting around in your bank account a few years ago. You could have just left it there and bought your mansion now. Your scheme gained you nothing, in fact you are worse off because you had to sell $175M of your Uber shares, which you wouldn't have had to sell if you had just kept your $175M in your bank account rather than investing in Juicero and Theranos.
My point is that the $175M you had in your bank account years ago was already realized and fully taxed because it was cash. So being able to spend it on a mansion is fair because it's already fully taxed. You used it up on your mansion and cannot spend it on anything else. If you want to buy a second mansion you'll have to find some new fully taxed money (such as sell more Uber shares and actually pay capital gains tax on them).
You need to account for the purchase of Uber shares here:
> you had to sell $175M of your Uber shares
If you had these separately to the Theranos etc shares, you had to buy them. Since the $175M was a full loss of $175M then that can't account for the (non-losing) Uber shares.
> you had to sell $175M of your Uber shares, which you wouldn't have had to sell if you had just kept your $175M in your bank account
You'd need to know to only invest in Uber, and not in Theranos etc to do this. The idea of the portfolio is you need to invest broadly to allow for the successes. If you kept the $175M in your bank account, you wouldn't be able to achieve that.
> you had to sell $175M of your Uber shares
If you had these separately to the Theranos etc shares, you had to buy them. Since the $175M was a full loss of $175M then that can't account for the (non-losing) Uber shares.
> you had to sell $175M of your Uber shares, which you wouldn't have had to sell if you had just kept your $175M in your bank account
You'd need to know to only invest in Uber, and not in Theranos etc to do this. The idea of the portfolio is you need to invest broadly to allow for the successes. If you kept the $175M in your bank account, you wouldn't be able to achieve that.
Yeah, I agree with all that. But I want to clarify a little.
>If you had these separately to the Theranos etc shares, you had to buy them. Since the $175M was a full loss of $175M then that can't account for the (non-losing) Uber shares.
Yep. So you had to have more than $175M of fully taxed money at the beginning. But most of that stayed in Uber, only a small percent of the Uber stock needed to be sold. This makes my original argument stronger, but only slightly. Since it only made my argument slightly stronger I didn't bother mentioning it.
>You'd need to know to only invest in Uber, and not in Theranos etc to do this. The idea of the portfolio is you need to invest broadly to allow for the successes. If you kept the $175M in your bank account, you wouldn't be able to achieve that.
Sure. But my main point is that this isn't a method to spend money while delaying tax on it. m_ke seemed to be saying a billionaire can spend money on a mansion without paying tax on it right away, but that $175M at the beginning already had tax paid on it. So the $175M spent on the mansion was fully taxed already.
A diversified portfolio helps with optimizing stock sales to delay some taxes. But enough taxes are still paid early such that every dollar spent is fully taxed by the time it's spent.
>If you had these separately to the Theranos etc shares, you had to buy them. Since the $175M was a full loss of $175M then that can't account for the (non-losing) Uber shares.
Yep. So you had to have more than $175M of fully taxed money at the beginning. But most of that stayed in Uber, only a small percent of the Uber stock needed to be sold. This makes my original argument stronger, but only slightly. Since it only made my argument slightly stronger I didn't bother mentioning it.
>You'd need to know to only invest in Uber, and not in Theranos etc to do this. The idea of the portfolio is you need to invest broadly to allow for the successes. If you kept the $175M in your bank account, you wouldn't be able to achieve that.
Sure. But my main point is that this isn't a method to spend money while delaying tax on it. m_ke seemed to be saying a billionaire can spend money on a mansion without paying tax on it right away, but that $175M at the beginning already had tax paid on it. So the $175M spent on the mansion was fully taxed already.
A diversified portfolio helps with optimizing stock sales to delay some taxes. But enough taxes are still paid early such that every dollar spent is fully taxed by the time it's spent.
A simpler example: Today you buy $100 of Theranos and $100 of Uber. Tomorrow your Theranos is worth $0 and Uber is worth $200. You put in $200, you still have $200, you use the Theranos loss to offset the Uber win. This is good, this is how things should work.
But some here would say "OMG he evaded taxes on the $100 Uber gain!"
Tax loss harvesting is not a loophole, it's exactly the right thing to have, and it's available to everyone.
But some here would say "OMG he evaded taxes on the $100 Uber gain!"
Tax loss harvesting is not a loophole, it's exactly the right thing to have, and it's available to everyone.
True, you avoided paying taxes, but you have less money than you would if you didn’t make the failed investment (you lost more money on that investment than you saved in taxes). Therefore the statement “no downside risk” is incorrect. Your downside risk is discounted by your tax rate, it’s not zero.
No, you make a ton of risky investments to build a diversified portfolio banking on only a few of them being unicorns. This allows you to cash out previous gains to match all of the losses that you pick up each year on the failed investments, while the successful ones keep appreciating and adding to your unrealized gains.
https://startupflux.com/jeff-bezos-investment-portfolio-owns...
https://startupflux.com/jeff-bezos-investment-portfolio-owns...
> I sell enough shares to match my losses
Which changes depending on losses. What you are missing is you needed to purchase the portfolio in the first place - The more tax you can write off, the more it mean you lost in the first place.
assume tax rate 25%, portfolio of startup portfolio cost $X.
$UBER_CG_BILLIONS - $X is portfolio unrealised CG. I'll assume this is positive, meaning $X < $UBER_CG_BILLIONS.
Assuming "I sell enough shares" means uber shares (as opposed to some other share),
I sell exactly $X worth of my Uber shares (ignoring what I paid for the Uber shares themselves), which I offset against losses to pay no tax. Since I had to pay $X initially, this is my original investment restored.
I retain ($UBER_CG_BILLIONS - $X) worth of Uber shares.
Where does the $175mil come from? Assuming it isn't the $X I had to invest in the first place, I could sell more Uber shares, but I would have to pay full tax - I already offset all my losses in order to get the original investment back.
TLDR; you suggest $175mil was gained without tax, but without mentioning how much was lost on the portfolio in the first place - presumably more than $175mil.
EDIT: Now assume that $X is $100 for the whole portfolio, per last sentence. How common would an Uber-billions unicorn be for such a small investment to rocket like that. The more diversified your portfolio, the thinner you spread your investment. Uber stock would have to increase by 10,000,000 in value to be worth just 1 billion, even if you only invested you $100 in Uber. It would need to increase by a factor of 1,000,000,000 to be worth "100s of billions".
Which changes depending on losses. What you are missing is you needed to purchase the portfolio in the first place - The more tax you can write off, the more it mean you lost in the first place.
assume tax rate 25%, portfolio of startup portfolio cost $X.
$UBER_CG_BILLIONS - $X is portfolio unrealised CG. I'll assume this is positive, meaning $X < $UBER_CG_BILLIONS.
Assuming "I sell enough shares" means uber shares (as opposed to some other share),
I sell exactly $X worth of my Uber shares (ignoring what I paid for the Uber shares themselves), which I offset against losses to pay no tax. Since I had to pay $X initially, this is my original investment restored.
I retain ($UBER_CG_BILLIONS - $X) worth of Uber shares.
Where does the $175mil come from? Assuming it isn't the $X I had to invest in the first place, I could sell more Uber shares, but I would have to pay full tax - I already offset all my losses in order to get the original investment back.
TLDR; you suggest $175mil was gained without tax, but without mentioning how much was lost on the portfolio in the first place - presumably more than $175mil.
EDIT: Now assume that $X is $100 for the whole portfolio, per last sentence. How common would an Uber-billions unicorn be for such a small investment to rocket like that. The more diversified your portfolio, the thinner you spread your investment. Uber stock would have to increase by 10,000,000 in value to be worth just 1 billion, even if you only invested you $100 in Uber. It would need to increase by a factor of 1,000,000,000 to be worth "100s of billions".
Do tell how he has “no downside risk” when if a company fails he loses that investment and the tax offset doesn’t make him whole?
You sound like the people who say “oh! He avoids tax through charitable donations - he donates $1M and gets a $300k write off”
You sound like the people who say “oh! He avoids tax through charitable donations - he donates $1M and gets a $300k write off”
Read my other replies, venture investing model assumes that 80% of your portfolio will go to 0 and that you hit a few unicorns that will account for most of your returns. I'm saying that Bezos can have a diversified portfolio and when he hits an Uber or Google he 1000xes his investment, which increases his net worth but isn't taxed because he gets to hold it for as long as he wants. Each year a % of his investments go to 0 and he gets to use that to cash out some of his gains without paying any taxes on them since his net gain is 0.
I'm not saying that he can save money by investing in a bunch of juiceros, just that each year when a few of his investments are duds he has a pool of unrealized gains that he can pull out tax free to match the losses.
I'm not saying that he can save money by investing in a bunch of juiceros, just that each year when a few of his investments are duds he has a pool of unrealized gains that he can pull out tax free to match the losses.
Are you assuming he deducts the entire loss amount from CG taxes? as in if he invests in (and loses) $100 on a portfolio, he can deducts $100 from his CG taxes - rather than a percentage of $100. Assuming tax rate is lower than 50% He loses more than he writes off in taxes, and so can cannot match his losses, only tax on the loss.
Well, I think the strategy is to keep balancing your gains and losses to minimize taxes until you die, by which point you’ve transferred all your wealth out tax-efficiently through trusts.
...by taking out loans and not paying them back? I'm not sure why any bank would sign up for that.
A HELOC is one example of a loan whose principal never needs to be paid off. As long as you keep making interest payments and the house keeps its value, the bank is happy.
> if somebody actually sold say 100M in stock at long term cap gains rates they should be paying roughly 15% tax
No, capital gains tax has brackets -- it isn't a flat 15% -- and the Net Investment Income Tax also applies; for $100M in cap gains, you would pay 23.8% (20% bracket + 3.8% NIIT) on the majority of those gains (everything over $440k single / $500k MFJ).
No, capital gains tax has brackets -- it isn't a flat 15% -- and the Net Investment Income Tax also applies; for $100M in cap gains, you would pay 23.8% (20% bracket + 3.8% NIIT) on the majority of those gains (everything over $440k single / $500k MFJ).
The loans are usually interest only.
ProPublica is making a point about billionaire wealth generation being radically different than average person’s (and thus opening you to more money/influence/power even just by donating it all to charity).
Substack author got stuck on “tax avoidance” and missed the broader point. Sure, perhaps taxes get paid at some point, but it’s radically different if you can build up a huge warchest and sock everything away behind future wealth transfer schemes. (And point that you get one-time 40% vs 20% cut then 40% cut is also valid).
Beyond all that - when you can accumulate wealth without taxes like that - you get security and comfort. Certainly there are reasons to prioritize investment, but why should earning income via wages put you at such a HUGE disadvantage?
Def doesn’t rise to the inflammatory title. ProPublica has a different attitude towards wealth and investment than you do - fine! Not sure there’s a truly “objective” way to look at this.
Substack author got stuck on “tax avoidance” and missed the broader point. Sure, perhaps taxes get paid at some point, but it’s radically different if you can build up a huge warchest and sock everything away behind future wealth transfer schemes. (And point that you get one-time 40% vs 20% cut then 40% cut is also valid).
Beyond all that - when you can accumulate wealth without taxes like that - you get security and comfort. Certainly there are reasons to prioritize investment, but why should earning income via wages put you at such a HUGE disadvantage?
Def doesn’t rise to the inflammatory title. ProPublica has a different attitude towards wealth and investment than you do - fine! Not sure there’s a truly “objective” way to look at this.
Actually, I think you missed the point of the article.
The overall point Jeremy is making is that: Propublica claims to be independent and non-partisan trying to do investigative journalism to the highest standards.
However, here they are really publishing a thinly veiled policy op-ed, and a pretty badly informed one at that. IE not investigative journalism.
They are further morally justifying the privacy invasion on some really shaky grounds as well.
Like, for example, even if one assumes that their story is somehow "investigative journalism" rather than "policy op ed", there is no obvious reason not to anonymize the data except to make it more salacious and get more clicks. They basically write that as their justification, along with some other "ends justify the means" crap, but try to make it sound better.
That is not an ethical or moral reason to do something.
You may agree or disagree, but this feels like a very valid set of points to raise, and doesn't "miss the point" at all.
It is propublica that is claiming to hold themselves to a high standard and failing in a lot of ways. So this is overall a critique/commentary on the standards folks are holding themselves to much more than "are they right".
The "are they right about tax" is almost secondary here, and that is what you (and lots of others) are focusing on.
Which is ironic, because it basically proves
The overall point Jeremy is making is that: Propublica claims to be independent and non-partisan trying to do investigative journalism to the highest standards.
However, here they are really publishing a thinly veiled policy op-ed, and a pretty badly informed one at that. IE not investigative journalism.
They are further morally justifying the privacy invasion on some really shaky grounds as well.
Like, for example, even if one assumes that their story is somehow "investigative journalism" rather than "policy op ed", there is no obvious reason not to anonymize the data except to make it more salacious and get more clicks. They basically write that as their justification, along with some other "ends justify the means" crap, but try to make it sound better.
That is not an ethical or moral reason to do something.
You may agree or disagree, but this feels like a very valid set of points to raise, and doesn't "miss the point" at all.
It is propublica that is claiming to hold themselves to a high standard and failing in a lot of ways. So this is overall a critique/commentary on the standards folks are holding themselves to much more than "are they right".
The "are they right about tax" is almost secondary here, and that is what you (and lots of others) are focusing on.
Which is ironic, because it basically proves
Get where you’re coming from - I agree that it’s not necessarily the most objective investigative piece (do we expect investigative journalism to be objective?)
That said - subhead from Substack is:
> What happens when journalists don't have any friends in finance to challenge their thinking?
Which to me firmly grounds their point in being about tax policy and not journalistic policy.
That said - subhead from Substack is:
> What happens when journalists don't have any friends in finance to challenge their thinking?
Which to me firmly grounds their point in being about tax policy and not journalistic policy.
> why should earning income via wages put you at such a HUGE disadvantage?
Wages are paid out of pre-tax earnings. Capital gains correspond to after-tax earnings. This puts them at approximately the same level. (A lot of cap gains are also due to inflation, i.e. they're fake gains.)
Wages are paid out of pre-tax earnings. Capital gains correspond to after-tax earnings. This puts them at approximately the same level. (A lot of cap gains are also due to inflation, i.e. they're fake gains.)
Capital gains are not "after-tax" earnings. That would be dividends which pretty much no one pays anymore (see stock buybacks). And corporate taxes are a joke, no one pays those either.
As a startup employee, I understand and appreciate the mechanics of capital gains taxes. But I also realize that the ultra wealthy are using a number tax maneuvers unfairly. They use shell companies to avoid paying corporate taxes, they use stock buybacks to avoid paying taxes on dividends, and they use stock as collateral for personal loans to avoid liquidating stock and paying capital gains.
My primary source of money/income are my wages. I have few if any options to defer or reduce my tax burden. Meanwhile folks much wealthier then I have figured out how to delay a large portion of their tax burden indefinitely. And in the meantime, roads need to be fixed, the military needs to be paid, etc... and many of these government expenditures disproportionately benefit the wealthy (roads subsidize cheap transportation of goods, military enforces US hegemony allowing for international trade (and stable allies in which one can locate their shell companies!)).
I am not a huge fan of wealth taxes, but I struggle to see a better solution that won't eventually get loopholed to death. A 1% tax on holdings worth more than $10M or so seems like it could be the solution. An added benefit is that it would "encourage" wealthy individuals to earn some income, take dividends, or realize capital gains in order to pay the wealth tax, and each of those actions would generate a separate set of tax revenues.
As a startup employee, I understand and appreciate the mechanics of capital gains taxes. But I also realize that the ultra wealthy are using a number tax maneuvers unfairly. They use shell companies to avoid paying corporate taxes, they use stock buybacks to avoid paying taxes on dividends, and they use stock as collateral for personal loans to avoid liquidating stock and paying capital gains.
My primary source of money/income are my wages. I have few if any options to defer or reduce my tax burden. Meanwhile folks much wealthier then I have figured out how to delay a large portion of their tax burden indefinitely. And in the meantime, roads need to be fixed, the military needs to be paid, etc... and many of these government expenditures disproportionately benefit the wealthy (roads subsidize cheap transportation of goods, military enforces US hegemony allowing for international trade (and stable allies in which one can locate their shell companies!)).
I am not a huge fan of wealth taxes, but I struggle to see a better solution that won't eventually get loopholed to death. A 1% tax on holdings worth more than $10M or so seems like it could be the solution. An added benefit is that it would "encourage" wealthy individuals to earn some income, take dividends, or realize capital gains in order to pay the wealth tax, and each of those actions would generate a separate set of tax revenues.
What do you mean by after tax? Capital gains are literally that, value increase of assets. How is that after tax?
Also, if you’re going to discount inflation, don’t you have to do the same for annual salaries which are very much worth less under any significant inflation?
Also, if you’re going to discount inflation, don’t you have to do the same for annual salaries which are very much worth less under any significant inflation?
Capital gains correspond with the increase in value of a company which ultimately corresponds with the increase in value due to profits after taxes.
Salaries tend to rise with inflation. The tax brackets are indexed to inflation, so there's no inflation tax on them.
Salaries tend to rise with inflation. The tax brackets are indexed to inflation, so there's no inflation tax on them.
I’m not sure I follow. If capital gains are strongly correlated with profit after taxes, shouldn’t price to earnings ratios be somewhat similar? For instance, GM has a past year p/e of 13 and Tesla has a p/e of 943.
Higher p/e's are based on expected future earnings. The two converge sooner or later.
Your income comes from a company which pays it with pretax money, you pay taxes on that money and then invest it in shares, companies earn money, pay taxes on the profits, and gain value (dividends/share buybacks/self-investment). The sum of corporate taxes and gains taxes are close in magnitude to income tax.
So a dollar goes into a corp, it either:
(1) gets paid to you, you pay your marginal income tax rate on it (say 28%), the corp doesn't pay a tax on it because you're an expense they deduct.
or
(2) they pay corporate tax on it (21%) and then it turns into gains for you and you pay LTCG on it (15%) = ~33%.
(and no, it's still automatically lower than your marginal income tax rate when you're in a higher tax bracket: LTCG goes up to 23.8% when you have sufficiently high investment income)
... and if you don't qualify for LTCG on that cap gain, you get taxed at your income tax rates on it even though you, as a (tiny) owner of the company, already paid corp taxes on.
So a dollar goes into a corp, it either:
(1) gets paid to you, you pay your marginal income tax rate on it (say 28%), the corp doesn't pay a tax on it because you're an expense they deduct.
or
(2) they pay corporate tax on it (21%) and then it turns into gains for you and you pay LTCG on it (15%) = ~33%.
(and no, it's still automatically lower than your marginal income tax rate when you're in a higher tax bracket: LTCG goes up to 23.8% when you have sufficiently high investment income)
... and if you don't qualify for LTCG on that cap gain, you get taxed at your income tax rates on it even though you, as a (tiny) owner of the company, already paid corp taxes on.
Well, first it appears that you’re discussing the underlying asset, and not the gains. The asset is presumably still there at the end of any gains, right?
Additionally you appear to be assuming that all capital investments ‘came from’ a paycheck and not some other source. Probably all of the underlying money in question in the original article was created through some kind of invention or productive work, not through Jeff Bezos investing his paycheck.
Additionally you appear to be assuming that all capital investments ‘came from’ a paycheck and not some other source. Probably all of the underlying money in question in the original article was created through some kind of invention or productive work, not through Jeff Bezos investing his paycheck.
I agree but:
> (A lot of cap gains are also due to inflation, i.e. they're fake gains.)
You are a poor investor (or at least a weird one!) if that much your gains are due to inflation -- even under the more aggressive or even kooky benchmarks of inflation they're still not that large compared to broad market returns.
The fact that the fake gains from inflation are taxed is probably somewhat market distorting in that it discourages investment in low risk low return opportunities, but (perhaps due to that distortion) it ends up not being that big of a factor overall.
> (A lot of cap gains are also due to inflation, i.e. they're fake gains.)
You are a poor investor (or at least a weird one!) if that much your gains are due to inflation -- even under the more aggressive or even kooky benchmarks of inflation they're still not that large compared to broad market returns.
The fact that the fake gains from inflation are taxed is probably somewhat market distorting in that it discourages investment in low risk low return opportunities, but (perhaps due to that distortion) it ends up not being that big of a factor overall.
Wow. The number of comments in this thread which focus on the trees, trees, trees rather than the forest is astonishing. The forest is clear, many people in the US with enormous wealth do not pay fair and reasonable taxes. But let us ignore that and focus on - well not even the trees but the leaves, leaves, leaves.
HN has a lot of 1%ers who despise the concept of paying taxes. As such, they love standing up for the <1%ers who pay no taxes and as such, shift the burden entirely onto the 99%.
Obviously, if we could distribute tax contributions proportionally, it would help everyone. But HN can’t fathom that.
Obviously, if we could distribute tax contributions proportionally, it would help everyone. But HN can’t fathom that.
HN has a lot of ~40%ers who imagine that they will be 1%ers some day. "Temporarily embarrassed millionaires", as it were.
Actual 1%ers are substantially over-represented, but they are (by definition) a very tiny fraction of the overall public.
Actual 1%ers are substantially over-represented, but they are (by definition) a very tiny fraction of the overall public.
Yea... you're talking about tax code. It literally is the trees and leaves of the issue. What do you want, a Bolshevik revolution? That'll fix things.
What lots of people still aren't realizing, all tax codes apply to everyone. There are no class distinctions. New tax codes apply to the 99% as well. When the whole GameStop/AMC stock ride happened, a lot of people realized "I now have an opinion about capital gains taxes... I don't like them". You have access to all the same loopholes the 1% have access to.
What lots of people still aren't realizing, all tax codes apply to everyone. There are no class distinctions. New tax codes apply to the 99% as well. When the whole GameStop/AMC stock ride happened, a lot of people realized "I now have an opinion about capital gains taxes... I don't like them". You have access to all the same loopholes the 1% have access to.
I do not have access to the same loopholes as the 1%. I do not own a foundation, corporation, or trust, and have no means of creating these.
You most likely do - founding a corporation is trivial in most European countries and the US. But you don't even need any of these things to get "access to the same loopholes" as "the 1%" - buy some stocks and hold them. You've now achieved the same tax "avoidance" that the ProPublica article is talking about.
That's not nearly all that the ProPublica article is talking about.
Realistically speaking, most people do NOT have access to the tax loopholes that the 1%+ does. I didn’t realize this was an actual argument, because it’s well established.
Using meme stock millionaires as an example is hilarious. That’s maybe a handful of people in comparison to the rest of the normal working class population.
Using meme stock millionaires as an example is hilarious. That’s maybe a handful of people in comparison to the rest of the normal working class population.
Here’s a great example of how the rich can creatively avoid taxes, fresh off the press:
https://www.bloomberg.com/news/articles/2021-06-09/sequoia-m...
https://www.bloomberg.com/news/articles/2021-06-09/sequoia-m...
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> I don’t think anyone involved at ProPublica grasps why virtually all developed countries don’t tax unrealized capital gains
This just isn’t true is it? According to the OECD Colombia, France, Norway, Spain, and Switzerland are the countries that raised revenue from net wealth taxes on individuals in 2019: https://en.m.wikipedia.org/wiki/Wealth_tax
This just isn’t true is it? According to the OECD Colombia, France, Norway, Spain, and Switzerland are the countries that raised revenue from net wealth taxes on individuals in 2019: https://en.m.wikipedia.org/wiki/Wealth_tax
OP here. I sort of agree with you, but it's a bit complicated and it wasn't obvious what the right way to word that was.
To get granular:
Wealth taxes are a bit distinct from taxing unrealized gains directly (even though they often have that effect, and there is some obvious overlap). If we look at, say, the Netherlands, they're assessing a ~1.7% wealth tax on assets over €1m independent of the performance of the assets over the year in question, which then exempts the payer from capital gains taxes upon sale. So we can call this taxing unrealized gains, but it's a bit imprecise in that they aren't taxing the gains themselves (which are unknown, and could be losses), but rather wealth at a prior point in time based on a fixed formula. If the asset in question went up 20%, the Dutch gov isn't going to tax the excess or force realization on any specific timeline. They'll just keep taking their 1.7% every year on whatever is there on Jan 1st.
There also aren't a lot of countries doing anything like this as touching upon non-real estate investments, and most European countries that have experimented with them are in the process of reversion (e.g., Norway, France) as it basically hasn't proved workable in most instances.
So maybe I should have left something like this as a footnote to clarify.
To get granular:
Wealth taxes are a bit distinct from taxing unrealized gains directly (even though they often have that effect, and there is some obvious overlap). If we look at, say, the Netherlands, they're assessing a ~1.7% wealth tax on assets over €1m independent of the performance of the assets over the year in question, which then exempts the payer from capital gains taxes upon sale. So we can call this taxing unrealized gains, but it's a bit imprecise in that they aren't taxing the gains themselves (which are unknown, and could be losses), but rather wealth at a prior point in time based on a fixed formula. If the asset in question went up 20%, the Dutch gov isn't going to tax the excess or force realization on any specific timeline. They'll just keep taking their 1.7% every year on whatever is there on Jan 1st.
There also aren't a lot of countries doing anything like this as touching upon non-real estate investments, and most European countries that have experimented with them are in the process of reversion (e.g., Norway, France) as it basically hasn't proved workable in most instances.
So maybe I should have left something like this as a footnote to clarify.
What? This is extreme hair splitting. Switzerland, Norway, etc, do tax unrealized gains. They net tax wealth of saleable assets along with cash at a specific point in the year, as you note.
That includes unrealized gains.
It’s totally unclear to me why you think the distinction here somehow invalidates the ProPublica piece.
That includes unrealized gains.
It’s totally unclear to me why you think the distinction here somehow invalidates the ProPublica piece.
ProPublica said that these billionaires were avoiding taxes because their unrealized gains weren't being taxed, and implied that they should be in a direct sense for fairness.
(Note that ProPublica mentions wealth taxes at the end, and then immediately dismisses them. Their object here really was/is gains taxation in a direct sense.)
My point was that this isn't tax avoidance, that there are reasons we don't tax unrealized gains directly, and that virtually no countries do it that way.
It's true that a few (and very much declining) number of countries have some form of wealth tax that includes some amount of unrealized gains. The Netherlands, for example, marks-to-market on Jan 1st of the tax year then doesn't actually track gains/losses over the next 364 days. So that obviously isn't a direct tax on gains. But it's certainly adjacent, and I said in the parent comment here.
(Note that ProPublica mentions wealth taxes at the end, and then immediately dismisses them. Their object here really was/is gains taxation in a direct sense.)
My point was that this isn't tax avoidance, that there are reasons we don't tax unrealized gains directly, and that virtually no countries do it that way.
It's true that a few (and very much declining) number of countries have some form of wealth tax that includes some amount of unrealized gains. The Netherlands, for example, marks-to-market on Jan 1st of the tax year then doesn't actually track gains/losses over the next 364 days. So that obviously isn't a direct tax on gains. But it's certainly adjacent, and I said in the parent comment here.
What? How else would a tax on unrealized gains work if not mark-to-market at a fixed day of the year?
This is exactly how Wyden’s proposal works as well, so I fail to understand the point you think you are making.
Personal wealth taxes are literally a tax on personal wealth including unrealized gains.
“I was wrong” is much easier to type than your confusing reply. :)
This is exactly how Wyden’s proposal works as well, so I fail to understand the point you think you are making.
Personal wealth taxes are literally a tax on personal wealth including unrealized gains.
“I was wrong” is much easier to type than your confusing reply. :)
There are taxes A B. B includes A.
ProPublica says "we'd love to see more of A, which is separate from B, as B doesn't seem especially workable".
A and B are not the same, even if one encompasses the other in some meta sense.
A is actionable in a direct sense. And if you wanted to do it in a direct sense, the M2M date you'd pick would not be the first day of the tax year. And you wouldn't use a fixed formula that ignored actual results of the asset.
ProPublica says "we'd love to see more of A, which is separate from B, as B doesn't seem especially workable".
A and B are not the same, even if one encompasses the other in some meta sense.
A is actionable in a direct sense. And if you wanted to do it in a direct sense, the M2M date you'd pick would not be the first day of the tax year. And you wouldn't use a fixed formula that ignored actual results of the asset.
> A and B are not the same, even if one encompasses the other in some meta sense.
What does "meta" mean in your usage? I may be missing some point you are trying to make. Personal wealth taxes encompass unrealized gains taxes, not in a "meta" sense, but in actuality.
Do you disagree?
> ProPublica says "we'd love to see more of A, which is separate from B, as B doesn't seem especially workable".
I took that to be ProPublica saying "one way to increase the total effective tax rate on the ultra-rich would be to tax unrealized gains. Wealth taxes do that; here are some downsides of wealth taxes as implemented elsewhere."
This strikes me as...fair and balanced reporting?
> A is actionable in a direct sense.
I don't know what this means. Hypothetically the US could have either a personal wealth tax or (only) a tax on unrealized gains.
> And if you wanted to do it in a direct sense, the M2M date you'd pick would not be the first day of the tax year.
No, I agree with this. The Swiss system uses mark-to-market at the end of the tax year. So...point you?
If ProPublica suggested the beginning of the year instead of the end of the year, I overlooked that. Good job catching them on this error, I guess? Or something?
> And you wouldn't use a fixed formula that ignored actual results of the asset.
I don't know what you mean by this. Can you rephrase?
What does "meta" mean in your usage? I may be missing some point you are trying to make. Personal wealth taxes encompass unrealized gains taxes, not in a "meta" sense, but in actuality.
Do you disagree?
> ProPublica says "we'd love to see more of A, which is separate from B, as B doesn't seem especially workable".
I took that to be ProPublica saying "one way to increase the total effective tax rate on the ultra-rich would be to tax unrealized gains. Wealth taxes do that; here are some downsides of wealth taxes as implemented elsewhere."
This strikes me as...fair and balanced reporting?
> A is actionable in a direct sense.
I don't know what this means. Hypothetically the US could have either a personal wealth tax or (only) a tax on unrealized gains.
> And if you wanted to do it in a direct sense, the M2M date you'd pick would not be the first day of the tax year.
No, I agree with this. The Swiss system uses mark-to-market at the end of the tax year. So...point you?
If ProPublica suggested the beginning of the year instead of the end of the year, I overlooked that. Good job catching them on this error, I guess? Or something?
> And you wouldn't use a fixed formula that ignored actual results of the asset.
I don't know what you mean by this. Can you rephrase?
It's the same as property taxes. Do they factor capital gains in some obvious sense? Sure! They're based on assessed value, which should be closer to market value than original sale price. But no one looks at them as the same as forcing gains realizations. Just two different things conceptually. Just so for wealth taxes, with are just property taxes for non-RE property.
Backing up a bit, you wrote,
"It's true that a few (and very much declining) number of countries have some form of wealth tax that includes some amount of unrealized gains. The Netherlands, for example, marks-to-market on Jan 1st of the tax year then doesn't actually track gains/losses over the next 364 days. So that obviously isn't a direct tax on gains."
I wrote,
"What? How else would a tax on unrealized gains work if not mark-to-market at a fixed day of the year?"
How do you believe an unrealized gains tax would work if not mark-to-market on a fixed day of the year?
Backing up even further, as I said, this is extreme hair splitting. Major economies do have wealth taxes, which include a tax on unrealized gains via mark-to-market. Is your point just "lol ProPublica r idiots nobody taxes just unrealized gains"?
"It's true that a few (and very much declining) number of countries have some form of wealth tax that includes some amount of unrealized gains. The Netherlands, for example, marks-to-market on Jan 1st of the tax year then doesn't actually track gains/losses over the next 364 days. So that obviously isn't a direct tax on gains."
I wrote,
"What? How else would a tax on unrealized gains work if not mark-to-market at a fixed day of the year?"
How do you believe an unrealized gains tax would work if not mark-to-market on a fixed day of the year?
Backing up even further, as I said, this is extreme hair splitting. Major economies do have wealth taxes, which include a tax on unrealized gains via mark-to-market. Is your point just "lol ProPublica r idiots nobody taxes just unrealized gains"?
If what he wrote about Dutch taxation, this tax is a replacement for income / capital gains tax, not an addition (and so far none of the "tax the rich" schemes that I saw included removing income or capital gains tax).
At 1.7% a year it gives you quite a few years before it would even reach the same level of taxation as income / capital gains tax.
To make it concrete: last year I made $200k in short term capital gains in stock market. It was taxed at my high marginal tax rate of 35%+, that I had to pay this year.
In Dutch system I would be much better off: I would pay 1.7% on that increase this year and continue paying 1.7% for 20 years before that would equal the amount I paid this year.
And if I managed to, say, 4-8x that $200k in 20 years (at 15% you double the money in 5 years, at 7.5% you double in 10 years, which is a return on S&P index fund), I would be even better off in Dutch system.
So US system, at least regarding stock (which is how all those billionaires in ProPublica article created their wealth) is better only if you hold your stock for 10-20 years, which is generally regarded as a good thing. It both provides stability for stock price and shows the confidence of a person in the business.
At 1.7% a year it gives you quite a few years before it would even reach the same level of taxation as income / capital gains tax.
To make it concrete: last year I made $200k in short term capital gains in stock market. It was taxed at my high marginal tax rate of 35%+, that I had to pay this year.
In Dutch system I would be much better off: I would pay 1.7% on that increase this year and continue paying 1.7% for 20 years before that would equal the amount I paid this year.
And if I managed to, say, 4-8x that $200k in 20 years (at 15% you double the money in 5 years, at 7.5% you double in 10 years, which is a return on S&P index fund), I would be even better off in Dutch system.
So US system, at least regarding stock (which is how all those billionaires in ProPublica article created their wealth) is better only if you hold your stock for 10-20 years, which is generally regarded as a good thing. It both provides stability for stock price and shows the confidence of a person in the business.
Few points:
- Yes, I don't know exhaustively, but a number of countries with wealth taxes do not have gains taxes.
- Your comparison is a little bit mistaken, I think; you're looking at the tax only on the gain, whereas (obviously) the tax would be on the entire principle. I'm too lazy to do the math, but a wealth tax is easy to factor in, since it's a fixed reduction in total yield on wealth. The long-term historical return on capital in the west is about 4%/year; a 1% wealth tax is thus averaging about 25% of that. Gains taxes are typically lower than that amount. (Note that in the US the long-term gains tax is 20% at the upper bracket.)
- Yes, I don't know exhaustively, but a number of countries with wealth taxes do not have gains taxes.
- Your comparison is a little bit mistaken, I think; you're looking at the tax only on the gain, whereas (obviously) the tax would be on the entire principle. I'm too lazy to do the math, but a wealth tax is easy to factor in, since it's a fixed reduction in total yield on wealth. The long-term historical return on capital in the west is about 4%/year; a 1% wealth tax is thus averaging about 25% of that. Gains taxes are typically lower than that amount. (Note that in the US the long-term gains tax is 20% at the upper bracket.)
> That includes unrealized gains.
And also includes everything else.
You pay the same tax if you have $1m in shares that you bought long ago for $10k or $1m in shares that you bought last month for $2m.
And also includes everything else.
You pay the same tax if you have $1m in shares that you bought long ago for $10k or $1m in shares that you bought last month for $2m.
Indeed. An unrealized capital gains tax by itself (which does not tax the basis) probably requires you adjust the taxable basis to ensure there's no double taxation at sale. A wealth tax irrespective of basis is administratively easier, I think.
The part about Norway is total bullshit. The "reversion" is solely because the Conservative party, the party for rich people, is in power.
There's no evidence it hasn't proved workable. The left coalition has promised to increase the wealth tax back again to recent levels if they gain power in the September election.
Edit: Just got banned from his blog for making this comment... https://i.imgur.com/ZkaLuRT.png
There's no evidence it hasn't proved workable. The left coalition has promised to increase the wealth tax back again to recent levels if they gain power in the September election.
Edit: Just got banned from his blog for making this comment... https://i.imgur.com/ZkaLuRT.png
It's certainly true that political winds are driving the reversions. But what's driving the politics?
Wealth taxes face three classic problems: (1) they're very hard to set in any fair sense given complexities of markets and assets, (2) they can induce liquidation in ways that are net bad for the economy, and (3) capital flight.
3 seems to have been a problem in Norway (https://archive.is/L6kyZ), as it was in France and elsewhere in Europe prior. If your tax system causes a net decrease in receipts because you're golden geese have fled, that's a workability problem!
Wealth taxes face three classic problems: (1) they're very hard to set in any fair sense given complexities of markets and assets, (2) they can induce liquidation in ways that are net bad for the economy, and (3) capital flight.
3 seems to have been a problem in Norway (https://archive.is/L6kyZ), as it was in France and elsewhere in Europe prior. If your tax system causes a net decrease in receipts because you're golden geese have fled, that's a workability problem!
That article consist of just a Conservative politician doing politics and a survey by various Chamber of Commerce's, not exactly good evidence.
Of course, the taxed are going to say that they don't like paying taxes.
Real evidence of capital flight in larger amounts than the taxes gained are harder to come by.
Of course, the taxed are going to say that they don't like paying taxes.
Real evidence of capital flight in larger amounts than the taxes gained are harder to come by.
If you'd been respectful, there'd be no ban!
Propublica and OP talk about taxing gains (as though the gains were income), while this wiki link refers to taxes on wealth. Those aren’t the same thing. The wealth tax would be a low rate that applies to your entire wealth each year, while the tax on gains would be higher but only apply when the gains occur.
I’ll grant that these would be two different ways to achieve very similar results, but I don’t read where propublica proposed a direct tax on capital gains rather than a more generalized wealth tax, which very much is a real thing.
Propublica calculates a “true tax rate” which uses the unrealized capital gains as the denominator. They don’t make any public policy recommendation in the article, but I think computing the tax rate in this way implies that the unrealized gains should be taxable income. They also mention that Senator Ron Wyden has proposed doing this.
Why? Calculating the tax rate as “taxes paid” / “net wealth” is just what the effective wealth tax would be if one existed. This is consistent with advocating for a wealth tax, which, as I noted elsewhere, does in fact exist in other OECD countries than the US.
Wealth taxes use wealth as the denominator. Propublica uses change in wealth as the denominator.
True. I find the denominator chosen to be weird.
[deleted]
Since Piketty's 'Capital' was published, there's been a lot of interest in the relationship between 'r', the return on wealth and 'g', the growth rate of the economy, and how this relationship is influenced by the tax system. The ProPublica story provides obviously relevant data to this discussion. It is not, as Arnold would have it, "bullshit".
Recent related threads:
We are publishing the tax secrets of the .001% - https://news.ycombinator.com/item?id=27434307 - June 2021 (463 comments)
Tax details of US super-rich allegedly leaked - https://news.ycombinator.com/item?id=27440881 - June 2021 (ongoing)
We are publishing the tax secrets of the .001% - https://news.ycombinator.com/item?id=27434307 - June 2021 (463 comments)
Tax details of US super-rich allegedly leaked - https://news.ycombinator.com/item?id=27440881 - June 2021 (ongoing)
It's clear that the author of this article has missed the point brought up by the ProPublica's story. The system isn't fair for everyone and it's relaxed towards the upper echelons. The author also assumes that everyone is part of the stock market and it's a community wealth pool. Why is it wrong that Jeff Bezos has to sell stock or have an actual income paycheck to pay for his wealth tax? The author says it would be bad because it would affect every shareholder negatively due to the lower stock value. Yes, it probably would, but value of stocks is impacted by externalities all the time, why would this possible scenario be the bad one? My point being, the author starts by stating how the ProPublica's article is at fault by technical standards and proceeds to give biased subjective opinions on how it did so.
> The system isn't fair for everyone and it's relaxed towards the upper echelons.
Isn't the author's primary point that everyone knows its unfair in this manner (Similar to how most of the world is) and the violation of privacy isn't justified because it didn't reveal anything new that wasn't extensively documented already?
> Why is it wrong that Jeff Bezos has to sell stock or have an actual income paycheck to pay for his wealth tax?
Is it your position that only people who are invested in public companies should have to pay wealth tax? If not, how do the people who have stock in private companies that cannot sell their stock expected to pay the wealth tax? If so, why would anyone invest in a public company?
Isn't the author's primary point that everyone knows its unfair in this manner (Similar to how most of the world is) and the violation of privacy isn't justified because it didn't reveal anything new that wasn't extensively documented already?
> Why is it wrong that Jeff Bezos has to sell stock or have an actual income paycheck to pay for his wealth tax?
Is it your position that only people who are invested in public companies should have to pay wealth tax? If not, how do the people who have stock in private companies that cannot sell their stock expected to pay the wealth tax? If so, why would anyone invest in a public company?
Yep, failing to differentiate unrealized gains falls in the realm of beginner information.
Taxes on Stocks Explained for Beginners that Know NOTHING About Taxes https://youtu.be/EKYMbsjUUtE?t=46
> > Those gains are not defined by U.S. laws as taxable income unless and until the billionaires sell.
--yes, precisely because they're not income until then.
> but incurious about why the laws are that way (not just in the US, but across the developed world.
--this is a great characterization, this settling for grasping what little one superficially comprehends about a complex subject does indeed come across as incurious. They never apparently rose to ask the next 3 or 5 questions that should immediately follow. If one's curiosity stopped at question 1 or 2 that's pretty underwhelming.
Taxes on Stocks Explained for Beginners that Know NOTHING About Taxes https://youtu.be/EKYMbsjUUtE?t=46
> > Those gains are not defined by U.S. laws as taxable income unless and until the billionaires sell.
--yes, precisely because they're not income until then.
> but incurious about why the laws are that way (not just in the US, but across the developed world.
--this is a great characterization, this settling for grasping what little one superficially comprehends about a complex subject does indeed come across as incurious. They never apparently rose to ask the next 3 or 5 questions that should immediately follow. If one's curiosity stopped at question 1 or 2 that's pretty underwhelming.
But they are income. They can use it directly as collateral for loans, they can use it to increase their assets, they can convert it to cash just about any time they want, etc.
I continue to miss what all the fuss is about on the ProPublica piece, both in the sense that (as this article points out) it’s not, in broad strokes, surprising, and in the sense that it’s very far from journalistic malfeasance.
This author argues that ProPublica “misunderstand” the difference between taxing unrealized gains and taxing income. I’ve seen this same argument on HN comments, as though knowing what a 1040-B is somehow makes one a tax policy expert.
Of course, there are countries that tax wealth directly, so “taxes paid as a percentage of wealth” is certainly a valid metric! And if the public are concerned about tax policy disparities between the ultra rich and the rest, it’s the only metric to look at[1]; as everyone knows, the ultra rich tend to earn their wealth primarily as capital gains, so a metric like “effective tax rate on earned income” would simply not be very informative across social classes.
I’m really surprised that this argument has taken off; it feel almost like some sort of astroturfing campaign. There’s no reason we shouldn’t talk about effective tax rates on wealth, even though this isn’t how the US tax code works; indeed, that’s really the point of the article.
1. As someone else noted, looking at returns on capital vs labor after taxes and transfers over time is a better approach to understanding trend, but as a snapshot view, I think this is quite reasonable and easier for readers to grasp.
This author argues that ProPublica “misunderstand” the difference between taxing unrealized gains and taxing income. I’ve seen this same argument on HN comments, as though knowing what a 1040-B is somehow makes one a tax policy expert.
Of course, there are countries that tax wealth directly, so “taxes paid as a percentage of wealth” is certainly a valid metric! And if the public are concerned about tax policy disparities between the ultra rich and the rest, it’s the only metric to look at[1]; as everyone knows, the ultra rich tend to earn their wealth primarily as capital gains, so a metric like “effective tax rate on earned income” would simply not be very informative across social classes.
I’m really surprised that this argument has taken off; it feel almost like some sort of astroturfing campaign. There’s no reason we shouldn’t talk about effective tax rates on wealth, even though this isn’t how the US tax code works; indeed, that’s really the point of the article.
1. As someone else noted, looking at returns on capital vs labor after taxes and transfers over time is a better approach to understanding trend, but as a snapshot view, I think this is quite reasonable and easier for readers to grasp.
OP here. Three things:
1. Most countries that have tried wealth taxes have either abandoned them or have had to constantly readjust them due to logistical difficulties and capital flight. They're elegant in theory, but very difficult practically.
2. The problem with ProPublica's coverage is that it was a tax policy argument masquerading as a news story. If they wanted to advocate for whatever policy position, that's fine! But to paint specific individuals as underpaying in taxes is deeply disingenuous. It poisons the civic well and gives casual readers the sense that something nefarious is happening.
3. Violating right-to-privacy laws to illustrate a policy proposal is bad! Really bad!
1. Most countries that have tried wealth taxes have either abandoned them or have had to constantly readjust them due to logistical difficulties and capital flight. They're elegant in theory, but very difficult practically.
2. The problem with ProPublica's coverage is that it was a tax policy argument masquerading as a news story. If they wanted to advocate for whatever policy position, that's fine! But to paint specific individuals as underpaying in taxes is deeply disingenuous. It poisons the civic well and gives casual readers the sense that something nefarious is happening.
3. Violating right-to-privacy laws to illustrate a policy proposal is bad! Really bad!
1. Two points: a) The capital flight argument is silly. The US has a global tax on tax residents already, alongside an onerous reporting scheme. b) So what? Again, I don’t understand your argument, which seems to be “this is just how it works—taxes on unrealized gains are rare.” Indeed they are rare, but isn’t that the entire point of the ProPublica piece?
2) No, it’s illustrating the consequences of current tax policy. I read (or misread?) your argument as “effective tax rates on total wealth is the wrong metric” (and you go on to suggest that looking at such a metric puts one as an ignorant). Why is this the wrong metric? Economists like Piketty and Milanovic—going back to Kuznets—have looked at returns on capital vs labor. Effective tax rates on capital are one such component. Why is it disingenuous to look at such a metric?
3) Really? I dunno. https://www.oyez.org/cases/1970/1873?
2) No, it’s illustrating the consequences of current tax policy. I read (or misread?) your argument as “effective tax rates on total wealth is the wrong metric” (and you go on to suggest that looking at such a metric puts one as an ignorant). Why is this the wrong metric? Economists like Piketty and Milanovic—going back to Kuznets—have looked at returns on capital vs labor. Effective tax rates on capital are one such component. Why is it disingenuous to look at such a metric?
3) Really? I dunno. https://www.oyez.org/cases/1970/1873?
> Delaying a tax is not avoiding a tax.
Delaying tax is part of normal tax avoidance strategy. A tax that is endlessly deferred, or deferred until there is a tax amnesty, is one that is avoided (or evaded). Deferring the payment of tax is good for the payer both for managing cash flows and from increasing the freedom tax accountants have in finding favourable terms when taxes are paid.
The main use of the term "avoidance" is its contrast to "evasion": the distinction is between those things an accountant does to benefit the client that are legal and those that are illegal. If you misrepresented your affairs to the IRS in order to defer a tax liability for a year, that would be tax evasion.
(FWIW, I used to be a tax accountant.)
Delaying tax is part of normal tax avoidance strategy. A tax that is endlessly deferred, or deferred until there is a tax amnesty, is one that is avoided (or evaded). Deferring the payment of tax is good for the payer both for managing cash flows and from increasing the freedom tax accountants have in finding favourable terms when taxes are paid.
The main use of the term "avoidance" is its contrast to "evasion": the distinction is between those things an accountant does to benefit the client that are legal and those that are illegal. If you misrepresented your affairs to the IRS in order to defer a tax liability for a year, that would be tax evasion.
(FWIW, I used to be a tax accountant.)
Overall this is a great criticism of the dubious assumptions in the ProPublica piece, but this part is over-the-top:
> But imagine that we forced lots of people to sell shares every April to pay for their gains. There’d be more sellers than buyers as everyone raced to raise cash, and prices would go down, and our collective wealth with it. No one really wants this. (To the degree that anyone wants it, it would be the rich — as they have the collective borrowing power to buy back shares on the cheap while poorer folks can’t.)
Such a scheme shouldn’t introduce an imbalance: with how liquid and efficient the stock market is, these exchanges would be known about well in advance and easy profits would be arbitraged away. It’s like saying that stocks of hot dog makers peak near the Fourth of July.
Now, this is a valid concern for illiquid assets, but:
1) The previous paragraph makes clear the argument refers to the stock market, and
2) It’s not fair to compare the most naive, reckless way of assessing a wealth tax, which forces such sales of hard to value assets.
> But imagine that we forced lots of people to sell shares every April to pay for their gains. There’d be more sellers than buyers as everyone raced to raise cash, and prices would go down, and our collective wealth with it. No one really wants this. (To the degree that anyone wants it, it would be the rich — as they have the collective borrowing power to buy back shares on the cheap while poorer folks can’t.)
Such a scheme shouldn’t introduce an imbalance: with how liquid and efficient the stock market is, these exchanges would be known about well in advance and easy profits would be arbitraged away. It’s like saying that stocks of hot dog makers peak near the Fourth of July.
Now, this is a valid concern for illiquid assets, but:
1) The previous paragraph makes clear the argument refers to the stock market, and
2) It’s not fair to compare the most naive, reckless way of assessing a wealth tax, which forces such sales of hard to value assets.
OP here. A few readers mentioned versions of this. Am correcting. (IRS would likely try to stagger in some way. But there's basically no good system for doing this, and you're going to cause roughly the same selling pressure no matter how you go about it. But agree that my framing was rushed/bad here for this bullet.)
A forced selloff doesn't destroy wealth; it improves price discovery of the assets that were previously hidden withheld from the market and overvalued.
The GME HODLing "apes" aren't creating wealth either, just transferring it
The GME HODLing "apes" aren't creating wealth either, just transferring it
So if you require mark to market (as of the last day of the tax year), and then everyone subject to that waits until April 10th to sell (and then when the sales clear, sends in their taxes), that would let people know the right day to buy is April 10th, and this new flood of buying would act against the flood of selling.
Also, the IRS wants quarterly estimated taxes, so that you don't owe a lot in April. The TLDR of the rules is if you owe more than 10% in April, you did it wrong and you'll pay a penalty subject to details I'm leaving out. That would tend to move from one sell day to four sell days throughout the year.
And some people like to get things done early, or have offset tax years or notice a trend that selling for Q2 estimated taxes the day after Q1 estimated taxes are due gets a better price, etc.
In short, I wouldn't worry too much over this. Mark to market rules for things that aren't so easy to price would be a much bigger concern.
Also, the IRS wants quarterly estimated taxes, so that you don't owe a lot in April. The TLDR of the rules is if you owe more than 10% in April, you did it wrong and you'll pay a penalty subject to details I'm leaving out. That would tend to move from one sell day to four sell days throughout the year.
And some people like to get things done early, or have offset tax years or notice a trend that selling for Q2 estimated taxes the day after Q1 estimated taxes are due gets a better price, etc.
In short, I wouldn't worry too much over this. Mark to market rules for things that aren't so easy to price would be a much bigger concern.
Mark to market isn't a panacea, even if you ignore the considerable costs it creates.
In some cases people are already required to mark some assets to market, doing so ends up causing to have large losses which wipes out their income entirely in some years. ... again resulting in some years with no tax in spite of being wealthy -- it's ultimately offset with higher taxes later, but in some individual years you end up with the same issue the article is complaining about but actually created by the MTM.
If that surprises you, realize that when you've marked an asset to market at a higher price-- you've also increased its cost basis to that higher price, so if it returns to the price you bought it at you now have a loss. Without the MTM at that point you'd simply have no gain, but not a loss.
(and if you don't allow writing of the loss you've created an utterly ruinous cost for owning any risky-- or even merely volatile asset)
In some cases people are already required to mark some assets to market, doing so ends up causing to have large losses which wipes out their income entirely in some years. ... again resulting in some years with no tax in spite of being wealthy -- it's ultimately offset with higher taxes later, but in some individual years you end up with the same issue the article is complaining about but actually created by the MTM.
If that surprises you, realize that when you've marked an asset to market at a higher price-- you've also increased its cost basis to that higher price, so if it returns to the price you bought it at you now have a loss. Without the MTM at that point you'd simply have no gain, but not a loss.
(and if you don't allow writing of the loss you've created an utterly ruinous cost for owning any risky-- or even merely volatile asset)
Awesome! Thanks for listening!
The stock market is not all public. Stocks can be sold privately, (i.e. private contracts, stock bartering) or trading private collaterizable assets (i.e stocks in private companies). What you see on CNBC is the average buying price what people are willing to purchase on the public market. How do you go about valuing those transactions?
I think the fact the price of the stocks going down as it's being sold implies in itself that most of the value is wholly speculative. And for that aspect of the issue in terms of taxation I think there's better targets for it like closing corporate income tax loopholes (ex. Blizzard-Activision in 2017 basically paid no taxes and was paid in effective tax credits from various govts from state and local to make videogames) which is where I think the real problem lies. I don't think anyone should assume the paper wealth of Bezos or Gates is real until they cash out. And if do they, they wind out losing much of that even without taxation.
>> ProPublica has obtained a vast trove of Internal Revenue Service data on the tax returns of thousands of the nation’s wealthiest people, covering more than 15 years
This statement alone is IRS-gate. Privacy breach at it's finest.
This statement alone is IRS-gate. Privacy breach at it's finest.
The author of this piece seems to have major anger issues. I got banned from being "uncooperative", despite being very respectful in my criticism [1].
[1] https://i.imgur.com/ZkaLuRT.png
[1] https://i.imgur.com/ZkaLuRT.png
lol
I've directly engaged with 100+ comments today. I stand behind my work in ways that virtually no writers do. All I ask in return is a basic bit of respect in the form of default rules of engagement. Forcing me to address the same concern in two places is bad form. When I informed you of that, you implied (per your own screenshot) that I was trying to get away with something underhanded. I don't need to be treated like that, so I blocked you in the space I control.
You can be as butthurt as you'd like! You can complain about it wide and far! Or you can reflect. It's up to you!
I've directly engaged with 100+ comments today. I stand behind my work in ways that virtually no writers do. All I ask in return is a basic bit of respect in the form of default rules of engagement. Forcing me to address the same concern in two places is bad form. When I informed you of that, you implied (per your own screenshot) that I was trying to get away with something underhanded. I don't need to be treated like that, so I blocked you in the space I control.
You can be as butthurt as you'd like! You can complain about it wide and far! Or you can reflect. It's up to you!
You did it first, you forced me to address the same misinformation in two places by duplicating the misinformation.
Yeah, I copied a reply from HN about an inaccuracy you hadn't adressed/fixed. Is that really a bannable offense?
You still haven't addressed it either, you're still misrepresenting political talking points of the Conservatives in Norway as established, undeniable facts.
For my other comments, you've just deflected.
Yeah, I copied a reply from HN about an inaccuracy you hadn't adressed/fixed. Is that really a bannable offense?
You still haven't addressed it either, you're still misrepresenting political talking points of the Conservatives in Norway as established, undeniable facts.
For my other comments, you've just deflected.
The offense was you intimating that I had bad motives when I simply wanted to centralize discussion and then link from one to the other (as I did). You clearly have no idea what it's like to manage replies at scale. People with bad faith engagement gum up the works, and that's unfair to everyone else, including me.
You've made your points. I've replied to all of them. Readers can judge.
You've made your points. I've replied to all of them. Readers can judge.
OK, I’ll judge: You sure enjoy explaining to others how to interact with you and expect everyone to abide by those rules, is my takeaway. Both from how you’ve interacted here across several comments, including being flagged off the site, and your origin story. Contempt when they do not is a strange look for someone doing day job comms for their own work, and it’s also poor form for HN.
Calling someone “butthurt” here used to invoke moderator action, as a direct point, but you’ve wormed your way in to the “can do whatever” club by having a Substack, I guess. It’s ironic how many rules you’re applying to others while overlooking those of this forum as a guest. Your comments are being flagged for a reason.
Also, Christ, it must be extremely tiring painting exact lines for other sapient individuals to follow and arguing with them if they don’t. Why not just roll with how things develop and try to be reasonable as best you can rather than hold the entire commenting public to your demands, which is plainly unsustainable? People are engaging with your work and you seem to be ... annoyed by that?
Calling someone “butthurt” here used to invoke moderator action, as a direct point, but you’ve wormed your way in to the “can do whatever” club by having a Substack, I guess. It’s ironic how many rules you’re applying to others while overlooking those of this forum as a guest. Your comments are being flagged for a reason.
Also, Christ, it must be extremely tiring painting exact lines for other sapient individuals to follow and arguing with them if they don’t. Why not just roll with how things develop and try to be reasonable as best you can rather than hold the entire commenting public to your demands, which is plainly unsustainable? People are engaging with your work and you seem to be ... annoyed by that?
There's a fundamental asymmetry here: many commenters vs. one of me. It's one big reason why most writers don't engage in comments at all. The time and energy burden is enormous.
As happens though, I think standing behind one's work is important, and that the investment is worthwhile on the net. So I engage more than most do, and I quite literally pay people when they help me see flaws in my work (or even just when they raise a really helpful point). This is good for all. But it's only sustainable when those on the other side engage in good faith. I told someone (who was already being super snarky) that I was centralizing their comments as they'd made the same one in two places. They responded with something deeply uncharitable. So I blocked them in one place but still addressed their concerns here (while linking readers from SS to here so they could follow). If that's not enough for you, lol ok.
As for butthurt, look, I've been on HN for a day. I don't know anything about the culture here. I don't even know what flags you're talking about or how to find them. No mods have gotten in touch with me about anything. If they did, I'd happily hear them out. But I'm never a dick to anyone who isn't a dick first, and even then I still try to engage in good faith if there's a real concern within their dump.
As happens though, I think standing behind one's work is important, and that the investment is worthwhile on the net. So I engage more than most do, and I quite literally pay people when they help me see flaws in my work (or even just when they raise a really helpful point). This is good for all. But it's only sustainable when those on the other side engage in good faith. I told someone (who was already being super snarky) that I was centralizing their comments as they'd made the same one in two places. They responded with something deeply uncharitable. So I blocked them in one place but still addressed their concerns here (while linking readers from SS to here so they could follow). If that's not enough for you, lol ok.
As for butthurt, look, I've been on HN for a day. I don't know anything about the culture here. I don't even know what flags you're talking about or how to find them. No mods have gotten in touch with me about anything. If they did, I'd happily hear them out. But I'm never a dick to anyone who isn't a dick first, and even then I still try to engage in good faith if there's a real concern within their dump.
Where did you reply to the legality as morality argument you made?
Some individuals believe it is fair to tax unrealized capital gains. How does this make sense?
Do people really think Jeff Bezos is worth 60+ billion when there is no liquidity to buy all of his stock at that price?
Do people really think Jeff Bezos is worth 60+ billion when there is no liquidity to buy all of his stock at that price?
Propublica's claims about how they verified the information seem to contradict the impression that they only recieved information about a few ultra rich persons-- comparing published returns from some 50 persons?
I'd guess you'd probably need the entire top 10% of all taxpayers to end up with the returns of 50 persons who've published them.
In any case, one thing this doesn't seem to point out is any significant nexus between most of the content of the article and the private data. Okay, various parties reported almost no income in some years-- We knew that. They talk about trusts used to escape estate taxes, but don't support it with their trove of private information.
As the OP says, the Propublica piece is essentially a standard tax policy op-end that could have been written today without the benefit of any new private information. The connection to the private data seems weak at best.
I'd guess you'd probably need the entire top 10% of all taxpayers to end up with the returns of 50 persons who've published them.
In any case, one thing this doesn't seem to point out is any significant nexus between most of the content of the article and the private data. Okay, various parties reported almost no income in some years-- We knew that. They talk about trusts used to escape estate taxes, but don't support it with their trove of private information.
As the OP says, the Propublica piece is essentially a standard tax policy op-end that could have been written today without the benefit of any new private information. The connection to the private data seems weak at best.
How do they afford lavish personal lifestyle if they're declaring no income (I get the cap gains part, I don't get the mansions, parties, cars, food etc. Bit)
You know Warren Buffett eats McDonald’s, right? A lavish personal lifestyle is not a requirement for being wealthy.
But in general, I assume that most of the perks of that wealth are really attached to the ownership/management of the corporation that produced the wealth.
But in general, I assume that most of the perks of that wealth are really attached to the ownership/management of the corporation that produced the wealth.
You raise an interesting point. On the other hand, Jeff Bezos is currently building a $0.5bn super-yacht.
It's not necessarily that they're declaring no income, it's that their income is entirely composed of long term capital gains which are taxed at a lower rate than standard income tax.
That's not actually the point of the ProPubica piece. The central point there is the treatement of unrealized capital gains.
They borrow money using their assets as collateral
... and then have to pay interest on top of the taxes for whatever they realize to pay it back (and the eventual “legit” realization)?
Potentially. But there’s also an inheritance loophole that allows them to avoid that: https://www.thebalance.com/how-the-stepped-up-basis-loophole...
Even without that loophole there are probably a bunch of tricks their financial planners have to minimise taxes (e.g. using trusts/charities, various tax free allowances).
Or alternatively, because they essentially get to defer taxes for as long as they like (by refinancing the loan), it means they have the full tax free amount of cash available up front to buy more wealth generating assets.
Even without that loophole there are probably a bunch of tricks their financial planners have to minimise taxes (e.g. using trusts/charities, various tax free allowances).
Or alternatively, because they essentially get to defer taxes for as long as they like (by refinancing the loan), it means they have the full tax free amount of cash available up front to buy more wealth generating assets.
> Potentially. But there’s also an inheritance loophole that allows them to avoid that: https://www.thebalance.com/how-the-stepped-up-basis-loophole...
but you still pay the estate tax? Otherwise you get hit by the capital gains tax AND the estate tax.
but you still pay the estate tax? Otherwise you get hit by the capital gains tax AND the estate tax.
It seems to me that quite a few things that we think of as lifestyle, can get written off as business expenses. Not that I know anything about this world.
read the propublica article - it explains. or be lazy. loans ;) in particular low interest loans. as high interest loans would sort of ruin the plot and those are reserved for the working class.
Interest rates aren't magic; secured loans have lower rates than unsecured.
Your mortgage is a low interest loan. Should we tax your mortgage as income?
The house the mortgage paid for is taxed.
I assume you're talking about property taxes, which is not really what we're talking about here.
[deleted]
My understanding is that this piece largely glosses over what is the only truly guaranteed way to escape taxes on capital gains: charitable trusts.
As the article aptly points out, deferring unrealized gains does not necessarily lead to tax avoidance. Either you eventually sell your assets and pay capital gains, or you die and gains are taxed via estate tax.
However, by transferring your assets to a charitable trust, you can avoid both capital gains tax and estate tax. Yes, your heirs will have to pay ordinary income tax when withdrawing from said trust, but due to the US's progressive income tax, said tax rate can be quite low.
Please correct me if I'm wrong.
As the article aptly points out, deferring unrealized gains does not necessarily lead to tax avoidance. Either you eventually sell your assets and pay capital gains, or you die and gains are taxed via estate tax.
However, by transferring your assets to a charitable trust, you can avoid both capital gains tax and estate tax. Yes, your heirs will have to pay ordinary income tax when withdrawing from said trust, but due to the US's progressive income tax, said tax rate can be quite low.
Please correct me if I'm wrong.
> Either you eventually sell your assets and pay capital gains
Or, you wait until the government makes a 'temporary' change to the tax code that allows you to reduce your tax more than normal and do it then. Which, to my understanding, is what actually happens...
Or, you wait until the government makes a 'temporary' change to the tax code that allows you to reduce your tax more than normal and do it then. Which, to my understanding, is what actually happens...
It’s a pretty bad piece. I love the part when they calculate the “true tax rate” (love the “true” part).
Elon Musk pays half a billion in taxes on $1.5B in income, which is 33%! But no, they divide his tax payment over all his assets to come up with 3%.
Maybe we should try that same math with other mid-career middle class tax payers? Oh, pay $50k in taxes on $150k in income. That’s not a 33% rate. The “true tax rate” is determined by dividing by your investment account, 401k, pension vesting, RSUs, vehicles and real estate holdings. Well holy shit! Your tax rate is low single digits too? Amazing.
Elon Musk pays half a billion in taxes on $1.5B in income, which is 33%! But no, they divide his tax payment over all his assets to come up with 3%.
Maybe we should try that same math with other mid-career middle class tax payers? Oh, pay $50k in taxes on $150k in income. That’s not a 33% rate. The “true tax rate” is determined by dividing by your investment account, 401k, pension vesting, RSUs, vehicles and real estate holdings. Well holy shit! Your tax rate is low single digits too? Amazing.
It is interesting to me that the main opposition argument to taxation of wealth seems to be that it could cause a crash of the stock when people need to sell. I would like to propose a counter argument and happy to debate its merits/shortfalls.
What if they don't sell. What if you pay in shares based on price increase over the year and we then transfer those shares into a sovereign fund. Obviously that would be a progressive tax to mimic what is already done for income tax. That fund could then manage those assets and could potentially redistribute them in people's 401K (US)/RRSP (Canada) or make them grow to pay for pensions/fund projects (like Quebec CDPQ). In the first case (redistribution), people are unlikely to all sell at the same time (there could even set a hold period to be sure) and since the transactions would be small overtime it is unlikely to stir the market. For the second option, then the fund would manage it more like any large portfolio and it has an incentive to keep the stock high so it would not dump their new stocks (it would also benefit from stock buybacks).
The fundamental end goal of taxation is to reduce inequalities in a society to keep it functional and peaceful. As we are seeing unprecedented levels of inequalities that tells me that the system is broken. You can call it tax delay all you want, but if I can delay taxes for 50-60 years it has sufficient negative impact on society at the scale we are talking that it should be reformed.
What if they don't sell. What if you pay in shares based on price increase over the year and we then transfer those shares into a sovereign fund. Obviously that would be a progressive tax to mimic what is already done for income tax. That fund could then manage those assets and could potentially redistribute them in people's 401K (US)/RRSP (Canada) or make them grow to pay for pensions/fund projects (like Quebec CDPQ). In the first case (redistribution), people are unlikely to all sell at the same time (there could even set a hold period to be sure) and since the transactions would be small overtime it is unlikely to stir the market. For the second option, then the fund would manage it more like any large portfolio and it has an incentive to keep the stock high so it would not dump their new stocks (it would also benefit from stock buybacks).
The fundamental end goal of taxation is to reduce inequalities in a society to keep it functional and peaceful. As we are seeing unprecedented levels of inequalities that tells me that the system is broken. You can call it tax delay all you want, but if I can delay taxes for 50-60 years it has sufficient negative impact on society at the scale we are talking that it should be reformed.
> The fundamental end goal of taxation is to reduce inequalities in a society to keep it functional and peaceful.
This is not at all clear. To many others, the fundamental end goal of taxation is to fund the government. The trillion dollar question is: is our goal to make the poor richer or the rich poorer? There’s broad disagreement on the answer to that question, and without acknowledging this, we’re really just shouting past each other.
This is not at all clear. To many others, the fundamental end goal of taxation is to fund the government. The trillion dollar question is: is our goal to make the poor richer or the rich poorer? There’s broad disagreement on the answer to that question, and without acknowledging this, we’re really just shouting past each other.
I follow the MMT thinking on that and I would say we are way past the time where one could reasonably argue that taxation funds the government. At best it serves to reduce the money supply to avoid inflation.
Having a strong middle class is a deep factor for the stability of a country. Inequalities is easily linkable to social unrest.
Having a strong middle class is a deep factor for the stability of a country. Inequalities is easily linkable to social unrest.
> Having a strong middle class is a deep factor for the stability of a country.
Again, in the grand debate about whether we ought to make the poor richer or the rich poorer, both sides would agree that "having a strong middle class is a deep factor for the stability of the country". Although I appreciate that you may not believe this (and you're entitled to your opinion), many are of the opinion that it's actually entirely possible to have a strong middle class by establishing a floor without pulling down the ceiling. That's the contention.
> Inequalities is easily linkable to social unrest.
What we're less certain of, is if this is due to inequality, or if it's due to existence of poverty alongside prosperity. If everyone below the poverty line was magically lifted out of poverty while preserving the existence of billionaires, would that lead to social unrest? It's worth checking in with Sweden, which has more billionaires per capita than the US, no wealth tax, imposes broad-based taxes on the middle class, and not particularly known for having social unrest.
Again, in the grand debate about whether we ought to make the poor richer or the rich poorer, both sides would agree that "having a strong middle class is a deep factor for the stability of the country". Although I appreciate that you may not believe this (and you're entitled to your opinion), many are of the opinion that it's actually entirely possible to have a strong middle class by establishing a floor without pulling down the ceiling. That's the contention.
> Inequalities is easily linkable to social unrest.
What we're less certain of, is if this is due to inequality, or if it's due to existence of poverty alongside prosperity. If everyone below the poverty line was magically lifted out of poverty while preserving the existence of billionaires, would that lead to social unrest? It's worth checking in with Sweden, which has more billionaires per capita than the US, no wealth tax, imposes broad-based taxes on the middle class, and not particularly known for having social unrest.
Honestly, this is the crazy part of all of this. The middle class was built on a bigger tax burder on the wealthy, which led to the largest epoch in human advancement (with a lot of caveats, yes -- but there's a lot of positives there).
Rolling back these tax rates has led to recession after recession and ever increasing gaps between the 1% and everyone else, and the middle class is shrinking.
It doesn't seem like it's such a hard line to draw between all of this.
Rolling back these tax rates has led to recession after recession and ever increasing gaps between the 1% and everyone else, and the middle class is shrinking.
It doesn't seem like it's such a hard line to draw between all of this.
> To many others, the fundamental end goal of taxation is to fund the government.
But isn't the purpose of a democratic government to keep society functional and peaceful?
But isn't the purpose of a democratic government to keep society functional and peaceful?
It certainly is, but then the next debate is whether the existence of rich people precludes a society from being functional and peaceful. I appreciate that you may believe that the mere presence of rich people destabilizes society, and therefore the goal should be to make the rich poorer. But you ought to know that many others don't buy into that belief, and in fact have built perfectly functional societies based around the theory that it's okay for there to be rich people as long as the poor are well taken care of.
Sweden has more billionaires per capita than the US, no wealth tax, and levies broad-based taxes on the middle class. The top marginal tax rate kicks in at 1.5 times the average wage, whereas in the US the top marginal tax rate kicks in at 9.2 times the average wage. And yet, you might probably define Swedish society as "functional and peaceful".
Sweden has more billionaires per capita than the US, no wealth tax, and levies broad-based taxes on the middle class. The top marginal tax rate kicks in at 1.5 times the average wage, whereas in the US the top marginal tax rate kicks in at 9.2 times the average wage. And yet, you might probably define Swedish society as "functional and peaceful".
I don't think the existence of superrich people in a society necessarily directly reduces the functionality and peace of that society, but instead is a symptom of broader issues. I think when it becomes a direct problem is when the superrich are allowed to use their wealth to strongly influence the system itself, opening feedback loops that let them enrich themselves. It's a bigger issue in the US since policymaking is strongly influenced by those with money.
> It's a bigger issue in the US since policymaking is strongly influenced by those with money.
This is a popular talking point, but one that has thus far been soundly refuted by empirical results.
https://twitter.com/AlecStapp/status/1401596911522615299
No amount of money will install a political leader that cannot win votes.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2605401
https://fivethirtyeight.com/features/money-and-elections-a-c...
This is a popular talking point, but one that has thus far been soundly refuted by empirical results.
https://twitter.com/AlecStapp/status/1401596911522615299
No amount of money will install a political leader that cannot win votes.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2605401
https://fivethirtyeight.com/features/money-and-elections-a-c...
Not elections, policymaking. The influence of lobbyists and corporate donations on how laws are formed and applied is well known and substantial.
First of all, policymaking is downstream of elections.
Second of all, the influence of lobbyists on how laws are formed is "well known" as a talking point, and nothing else. There aren't any hard empirical studies that draw a causal line.
In fact, to really drive home that point, I'll reiterate a sentence I wrote in a previous reply to you, but with a minor addition:
Sweden has more billionaires per capita than the US, no wealth tax, and levies broad-based taxes on the middle class. The top marginal tax rate kicks in at 1.5 times the average wage, whereas in the US the top marginal tax rate kicks in at 9.2 times the average wage. Lobbying on policymakers is unregulated (http://www.aalep.eu/lobbying-landscape-sweden). And yet, you might probably define Swedish society as "functional and peaceful".
Second of all, the influence of lobbyists on how laws are formed is "well known" as a talking point, and nothing else. There aren't any hard empirical studies that draw a causal line.
In fact, to really drive home that point, I'll reiterate a sentence I wrote in a previous reply to you, but with a minor addition:
Sweden has more billionaires per capita than the US, no wealth tax, and levies broad-based taxes on the middle class. The top marginal tax rate kicks in at 1.5 times the average wage, whereas in the US the top marginal tax rate kicks in at 9.2 times the average wage. Lobbying on policymakers is unregulated (http://www.aalep.eu/lobbying-landscape-sweden). And yet, you might probably define Swedish society as "functional and peaceful".
> The trillion dollar question is: is our goal to make the poor richer or the rich poorer?
What if I reject your premise that those are opposite, and that I can heavily tax the rich which at the same time making the poor richer?
What if I reject your premise that those are opposite, and that I can heavily tax the rich which at the same time making the poor richer?
All you really did was declare that your goal is to both make the poor richer as well as the rich poorer. And I respect your right to have that opinion, but just want to point out that there are loads of thriving societies that are built around the goal of making the poor richer while actively minimizing the degree to which the rich are made poorer.
The vast majority of European countries, especially those with generous welfare states, fund their programs via broad-based taxes that fall on the middle class (https://taxfoundation.org/scandinavian-countries-taxes-2021/). They also happen to have more billionaires per capita than the US.
The vast majority of European countries, especially those with generous welfare states, fund their programs via broad-based taxes that fall on the middle class (https://taxfoundation.org/scandinavian-countries-taxes-2021/). They also happen to have more billionaires per capita than the US.
No, you said (in fact, declared without evidence) that we have to decide on one of two mutually exclusive goals, and further resolving which goal had to be the very first thing we discussed. My point is they don't seem to be more than tangentially related. It's entirely possible to make the rich poorer and the poor richer. Therefore we have to answer two different questions: to what degree do we want to make the rich poorer (or richer)? to what degree do we want to make the poor richer (or poorer)?
I didn't set up the false dilemma. If you want to discuss them as two different propositions (as you seem to), that's fine.
Your link discusses the Scandinavian countries. Those have a GINI (income score) about half that of the US. Of course they have broad-based taxes. That seems to be a requirement. It's just not an argument that they are prioritizing minimizing the degree to which the rich are made poorer.
I didn't set up the false dilemma. If you want to discuss them as two different propositions (as you seem to), that's fine.
Your link discusses the Scandinavian countries. Those have a GINI (income score) about half that of the US. Of course they have broad-based taxes. That seems to be a requirement. It's just not an argument that they are prioritizing minimizing the degree to which the rich are made poorer.
> we have to decide on one of two mutually exclusive goals
> Your link discusses the Scandinavian countries. Those have a GINI (income score) about half that of the US. Of course they have broad-based taxes.
I want to address everything you just said, but these two points stand out.
The GINI coefficient is not a particularly useful metric precisely because the US could halve its GINI simply by increasing the income of its poorest people. It tells us nothing about the degree to which a country goes to make its rich poorer.
Which brings me to your second point; Scandinavian countries have the GINI scores that they do precisely because they have welfare that can only be feasibly funded by broad-based taxes (even Bernie Sanders admits this https://www.cnn.com/videos/politics/2019/06/28/sanders-middl...). And the only way you get a society to adopt broad based taxes is if you decide the variable you want to optimize is making the poor richer, rather than the rich poorer.
In America, especially among the center-left, there's a strong aversion to adopting taxes on the middle class — it's the only way one can fund the kinds of programs that reduce GINI — precisely because the rhetoric is less around making sure the poor are taken care of, but rather around making sure "the rich pay their fair share".
So that's the reason why it's presented as mutually exclusive goals. Once society agrees upon an OKR, it will converge around any solution that satisfies that OKR. As long as our OKRs are defined around how rich the rich are, rather than how poor the poor are, the solutions we converge around will look less like the GINI-reducing Scandinavian countries (which have high middle class taxes and VATs), and more like the US, which happens to have the most progressive taxation in the developed world[1][2].
[1] https://www.washingtonpost.com/news/wonk/wp/2013/04/05/ameri...
[2] https://faculty.washington.edu/vmenaldo/Inequality%20Researc...
> Your link discusses the Scandinavian countries. Those have a GINI (income score) about half that of the US. Of course they have broad-based taxes.
I want to address everything you just said, but these two points stand out.
The GINI coefficient is not a particularly useful metric precisely because the US could halve its GINI simply by increasing the income of its poorest people. It tells us nothing about the degree to which a country goes to make its rich poorer.
Which brings me to your second point; Scandinavian countries have the GINI scores that they do precisely because they have welfare that can only be feasibly funded by broad-based taxes (even Bernie Sanders admits this https://www.cnn.com/videos/politics/2019/06/28/sanders-middl...). And the only way you get a society to adopt broad based taxes is if you decide the variable you want to optimize is making the poor richer, rather than the rich poorer.
In America, especially among the center-left, there's a strong aversion to adopting taxes on the middle class — it's the only way one can fund the kinds of programs that reduce GINI — precisely because the rhetoric is less around making sure the poor are taken care of, but rather around making sure "the rich pay their fair share".
So that's the reason why it's presented as mutually exclusive goals. Once society agrees upon an OKR, it will converge around any solution that satisfies that OKR. As long as our OKRs are defined around how rich the rich are, rather than how poor the poor are, the solutions we converge around will look less like the GINI-reducing Scandinavian countries (which have high middle class taxes and VATs), and more like the US, which happens to have the most progressive taxation in the developed world[1][2].
[1] https://www.washingtonpost.com/news/wonk/wp/2013/04/05/ameri...
[2] https://faculty.washington.edu/vmenaldo/Inequality%20Researc...
> o precisely because they have welfare that can only be feasibly funded by broad-based taxes
I'm confused by why you think you're disagreeing with me. My point is that efforts to make poor people richer can be totally separate from efforts to make rich people poorer. Of course broad-base taxation can raise poor people's standard of living. That's my point, it's totally orthogonal to whether we want to have additional taxes on the very rich to prevent wealth inequality.
I'm confused by why you think you're disagreeing with me. My point is that efforts to make poor people richer can be totally separate from efforts to make rich people poorer. Of course broad-base taxation can raise poor people's standard of living. That's my point, it's totally orthogonal to whether we want to have additional taxes on the very rich to prevent wealth inequality.
And my point is that there's no reason "wealth inequality" is something you'd want to prevent unless your goal was to make the rich poorer.
I completely appreciate that you may think it's a worthwhile cause (or not, who am I to ascribe your views), but I'm just pointing out that it's worth separating "making the poor richer" from "making the rich poorer"; as you rightly pointed out, they are different goals. Some people even want both!
Among those that adopt zero-sum thinking, there has unfortunately been a conflation of the two aims by suggesting that the only way to make the poor richer is to make the rich poorer. What I am pointing out is that not everyone adopts this zero-sum thinking, and the best way to identify whether one does is by asking the question: "is the goal to make the poor richer, or the rich poorer?".
Based on your argumentation, I concede that a more complete question is "is the goal to make the poor richer, the rich poorer, or both?". Many folks are in column A, many in B, and many in C. Until we acknowledge that, we're just shouting talking points past each other based on assumed moral premises.
I completely appreciate that you may think it's a worthwhile cause (or not, who am I to ascribe your views), but I'm just pointing out that it's worth separating "making the poor richer" from "making the rich poorer"; as you rightly pointed out, they are different goals. Some people even want both!
Among those that adopt zero-sum thinking, there has unfortunately been a conflation of the two aims by suggesting that the only way to make the poor richer is to make the rich poorer. What I am pointing out is that not everyone adopts this zero-sum thinking, and the best way to identify whether one does is by asking the question: "is the goal to make the poor richer, or the rich poorer?".
Based on your argumentation, I concede that a more complete question is "is the goal to make the poor richer, the rich poorer, or both?". Many folks are in column A, many in B, and many in C. Until we acknowledge that, we're just shouting talking points past each other based on assumed moral premises.
Okay, I think we're on the same page. I misinterpreted your original post as denying C existed, and therefore trying to set up a dilemma for people in column C (both) where they had to pick either poor richer or rich poorer. I find that most people want the poor to become richer, but whether to make the rich poorer or not is a pretty debated point.
Crashing the stock market is a short-sighted metric, but it would have significant impact over the levels of investment.
Once investment goes down, all goes down hill: productivty, wages, tax revenues etc.
Wealth taxes are also very distortive, the incentives to avoid them are large and the capacity to do it is plentiful: you could get your wealth in a crypto synthetic in another country and that would be it.
In the end, this is likely whats going to happen anyway to prevent hit pieces, getting targeted by media, etc.
What is salient is that people talk about taxes as if it were a christian sacrifice that it must be made: is it a virgin, a goat or a first born. Government in the US today is spending a lot more than it has in decades, even before Covid!
Any debate about adding tax pressures is simply more statism.
Once investment goes down, all goes down hill: productivty, wages, tax revenues etc.
Wealth taxes are also very distortive, the incentives to avoid them are large and the capacity to do it is plentiful: you could get your wealth in a crypto synthetic in another country and that would be it.
In the end, this is likely whats going to happen anyway to prevent hit pieces, getting targeted by media, etc.
What is salient is that people talk about taxes as if it were a christian sacrifice that it must be made: is it a virgin, a goat or a first born. Government in the US today is spending a lot more than it has in decades, even before Covid!
Any debate about adding tax pressures is simply more statism.
As long as I get a refund when the stocks I hold decrease in value then I'm good with taxing unrealized capital gains. I'm going to be belly belly rich!
[deleted]
There are some very stupid things in that article. I ignored them. There were some good points:
1. Proof of the hypocrisy of top billionaires lobbying for higher taxes on their competition.
2. The typical American pays almost twice as much in taxes as they are able to keep for themselves, while top billionaires get 100x in the opposite direction.
I saw this as evidence that the tax system is just feudal wealth transfer to our owners. Their 'solutions' are also terrible, but there is strong evidence that we don't need it at all. Income tax is currently less than 10% of treasury funding.
1. Proof of the hypocrisy of top billionaires lobbying for higher taxes on their competition.
2. The typical American pays almost twice as much in taxes as they are able to keep for themselves, while top billionaires get 100x in the opposite direction.
I saw this as evidence that the tax system is just feudal wealth transfer to our owners. Their 'solutions' are also terrible, but there is strong evidence that we don't need it at all. Income tax is currently less than 10% of treasury funding.
I think the most concerning element in the ProPublica piece is that there might be individuals inside the government who are willing to exfiltrate extremely sensitive private information and hand it over to outside parties without any public process/consent - this seems like a major privacy risk, and even more so than other entities/corporations one deals with it's very hard (for understandable reasons!) to prevent the IRS from collecting and retaining personal information, and tough to keep them accountable for the information they do collect.
“Nevermind the fire, who dialed 911?”
People have this belief that the government is all-powerful. But the reason why they tax income and not wealth is because it's easier.
The smartest people on this planet are not working for the IRS they are working for the rich avoiding said taxation.
The smartest people on this planet are not working for the IRS they are working for the rich avoiding said taxation.
100% agree. ProPubluca author seems to not know difference between income and wealth.
A LOT of people here seem to be very willing to tax unrealized gains.
I hope you all know that that would kick gentrification into hyperdrive and force a whole lot of people out of their homes.
I hope you all know that that would kick gentrification into hyperdrive and force a whole lot of people out of their homes.
Man I am so glad someone is saying this. This was exactly my reaction to this article. ProPublica normally does relatively good work in my experience, but this piece just basically boiled down to: Did you know that you don't have to pay capital gains tax until you sell? And rich people often don't sell for a long time?
I mean, it's a useful facet of our tax regime to understand. And it's an important part of how rich people end up paying a much lower tax rate than others. But the idea that this is some nefarious scheme that they've uncovered by stealing Jeff Bezos's tax returns is....just completely ridiculous. Anyone who understood the US tax system even a little bit should have known that this was exactly what was happening.
I mean, it's a useful facet of our tax regime to understand. And it's an important part of how rich people end up paying a much lower tax rate than others. But the idea that this is some nefarious scheme that they've uncovered by stealing Jeff Bezos's tax returns is....just completely ridiculous. Anyone who understood the US tax system even a little bit should have known that this was exactly what was happening.
Kinda - although CGT is at a much lower rate than employment income, and you can write all sorts of expenses off against it. I mean, I had to go to Mauritius for a week to sell those stocks, and the entertainment bill was huge. Oh and look no tax.
Oh and you can write off unrealised losses against realised gains.
Oh and you can write off unrealised losses against realised gains.
"and the entertainment bill was huge"
Is that how it works though, 'even' in the US (where in my understanding there are a lot more options for deductions than in the European tax systems I have experience with)? Can you just deduct any expense that you can somehow however far fetched are connected to your investments? Usually once you start looking into the details, it turns out that it's not so outlandish as people (in the camp of the Pro Repulica piece, i.e. the 'tax others more' crowd) try to make it seem.
Is that how it works though, 'even' in the US (where in my understanding there are a lot more options for deductions than in the European tax systems I have experience with)? Can you just deduct any expense that you can somehow however far fetched are connected to your investments? Usually once you start looking into the details, it turns out that it's not so outlandish as people (in the camp of the Pro Repulica piece, i.e. the 'tax others more' crowd) try to make it seem.
Entertainment was a poor choice on my part - it’s the hardest expense to justify, if you’re audited, but in the U.K. at least, you can write an awful lot off against costs of acquisition and disposal. For example, you can claim the mortgage interest on your primary domestic property as an allowable expense, as you can argue that you took the mortgage in order to finance your capital activities.
> Kinda - although CGT is at a much lower rate than employment income, and you can write all sorts of expenses off against it.
Ya, definitely. Although Biden's tax proposals may change that. If ProPublica wanted to put out a piece arguing for a higher capital gains rate, i'd be totally fine with that, but that isn't what they did.
> Oh and you can write off unrealised losses against realised gains
I don't think that's true, at least not in the US. Do you have a citation for that?
Ya, definitely. Although Biden's tax proposals may change that. If ProPublica wanted to put out a piece arguing for a higher capital gains rate, i'd be totally fine with that, but that isn't what they did.
> Oh and you can write off unrealised losses against realised gains
I don't think that's true, at least not in the US. Do you have a citation for that?
To be fair, it’s not directly true, but it’s commonly done. You just start an offshore trust, sell the loss to them, by which means you realise it (even though you’ve just moved where it sits in your network of entities), and you can then write it down.
This definitely sits in “evasion” rather than “avoidance”, but it’s such a common practice that accountants recommend it like it’s just another normal service they offer.
This definitely sits in “evasion” rather than “avoidance”, but it’s such a common practice that accountants recommend it like it’s just another normal service they offer.
In their article they have compared the income tax rate with wealth adjusted tax rate.
Out of curiosity, what would a wealth adjusted tax rate be for a dual income family that owns a house?
Out of curiosity, what would a wealth adjusted tax rate be for a dual income family that owns a house?
[deleted]
This is why things like the NY Stock Transaction Tax rebate should be repealed and expanded. And why we need property taxes to apply to these financial holdings. There is currently too much untaxable property that will never be cycled through the economy in a way that allows them to be properly taxed. Propublica's framing is still wrong.
> Propublica's framing is still wrong.
Could you expand on that?
Could you expand on that?
This is generally the outcome when “normal” journalists try to write about high level tax stuff. They’re not equipped to understand let alone authoritatively opine on it. Same with the offshore stuff - very few people have visibility on that world and journalists as a general rule don’t. Doesn’t seem to stop them though
Why is this being flagged? It raises many valid points against Propublica's article which was more misleading than this piece or its title.
It’s being flagged right now because frankly it is deeply popular to hate rich people, especially in this political climate. Since this article raises an unpopular, opposite point of view, it has been flagged.
The article didn't even go very far to defend rich people or their wealth, merely arguing that it's not bad for people to obey existing laws that permit them to defer paying taxes on unrealized capital gains, and possibly also not bad for them to obey existing laws that permit them to give unrealized capital gains to charity instead of being taxed on them.
I wholeheartedly agree. But the reddit hypersensitive and hyperbolic mentality is seeping out of reddit - any mention that even suggests that contrary belief is wrong or misguided is met with a strong response that discourages further discussion on the matter. Cancel culture, in short. I’ve been seeing it creep into HN for quite some time, although it’s more civil here.
I stopped short of flagging it myself, but I disagree that it "raises many valid points". At best it seems to miss the forest for the trees, and at worst reads far worse intentions into the Propublica article than I can see. However, it does so in a way that takes a disproportionate amount of effort to refute, where it's not just a subjective judgment call. This is a pretty decent definition of toxicity. Silencing it is really the only effective way to deal with it.
It's frankly scary that this line of thinking has become so in vogue. Let's exacerbate the definition of something to the point that it must be censored.
Example:
"takes a disproportionate amount of effort to refute" -> This is a pretty decent definition of toxicity -> Silencing it is really the only effective way to deal with it.
Example:
"takes a disproportionate amount of effort to refute" -> This is a pretty decent definition of toxicity -> Silencing it is really the only effective way to deal with it.
Once you've admitted it's toxic, and not just a dissenting opinion, the alternative is to allow the quality of discussion to fall until it arrives at the unmoderated mean, where no intellectual or valuable conversation occurs. There are infinite places online to engage at that level.
Edit: I'm not asserting that this particular case is in fact toxic. Anyway, it's subjective.
Edit: I'm not asserting that this particular case is in fact toxic. Anyway, it's subjective.
I'm understand. I'm generally in favor of people being able to express controversial opinions held in good faith. But I've been forced to accept that some people just need to be shut up however possible. In this case I'm not saying he should have his blog taken away, but I am saying no one should amplify content like this.
In the abstract, something is toxic if it disrupts or makes impossible desired processes even in very small amounts. Trolling is obvious, conspiracy theories are closer. Some things inherently generate more heat than light, suck oxygen out of productive conversation. You don't have to be a radical leftist (I'm really not at all), you can just watch it happen here or any other forum.
In the abstract, something is toxic if it disrupts or makes impossible desired processes even in very small amounts. Trolling is obvious, conspiracy theories are closer. Some things inherently generate more heat than light, suck oxygen out of productive conversation. You don't have to be a radical leftist (I'm really not at all), you can just watch it happen here or any other forum.
IMO, Arnold's article is just not very good. I come here for the good articles.
> and at worst reads far worse intentions into the Propublica article than I can see.
The ProPublica article calls out Warren Buffett for tax avoidance, even though he simply had less income. I question the integrity of the writers who want to slander Buffett, who has been extremely outspoken about increasing the taxes rich people pay. There exists no tax on unrealized gains, and Buffett did not realize gains, so why would they try to make an example out of him by falsely accusing him of hypocrisy?
How do you claim someone is avoiding a tax that does not even exist?
While they might have a point about needing to tax unrealized gains, they certainly went about it in an inappropriate manner, more suited for a tabloid rather than a respectable outlet for journalism.
The ProPublica article calls out Warren Buffett for tax avoidance, even though he simply had less income. I question the integrity of the writers who want to slander Buffett, who has been extremely outspoken about increasing the taxes rich people pay. There exists no tax on unrealized gains, and Buffett did not realize gains, so why would they try to make an example out of him by falsely accusing him of hypocrisy?
How do you claim someone is avoiding a tax that does not even exist?
While they might have a point about needing to tax unrealized gains, they certainly went about it in an inappropriate manner, more suited for a tabloid rather than a respectable outlet for journalism.
[deleted]
The article's title broke the site guidelines. The submitter has since edited it.
> It raises many valid points against Propublica's article which was more misleading than this piece or its title.
That's your assertion, not a fact. It's a bit circular to use your assertion to support the idea that this is a quality article.
That's your assertion, not a fact. It's a bit circular to use your assertion to support the idea that this is a quality article.
Here's ProPublica's article, which I think would is much more informative and interesting, and includes a lot of research:
https://www.propublica.org/article/the-secret-irs-files-trov...
And here's the NY Times coverage of it:
https://www.nytimes.com/2021/06/08/us/politics/income-taxes-...
https://www.propublica.org/article/the-secret-irs-files-trov...
And here's the NY Times coverage of it:
https://www.nytimes.com/2021/06/08/us/politics/income-taxes-...
Am I missing something? This is a reply to that article, which is linked in the embedded tweet in this article.
The title is definitely trolling and should be changed. (The article also looks that way to me, but there's no HN rule against it.)
OP here. Can you explain to me how calling bullshit by its name is trolling?
I'm sorry your account got rate-limited (I'm a mod here) - it's a restriction on new accounts that's based on past abuses by spammers and trolls, and is not intended to prevent authors from discussing their work here. I've marked your account legit so this won't happen again, and I'm going to restore your comment that got throttled.
This is a significant drawback in HN's system and we're intending to fix it.
This is a significant drawback in HN's system and we're intending to fix it.
Thanks!
Calling somebody's work "bullshit" is about on the same level as name-calling, even if your criticism is totally legitimate. In general "it's true" doesn't really make sense as a defense for incendiary words. So I don't think it's unreasonable to say your headline is in some way trolling. Of course, it's hard to blame somebody if the thing they're replying to is dramatic enough, but I just don't think bad journalism on a tax article (giving you the benefit of the doubt - I don't know who's right) meets that bar here. There's enough noise in the journalist-hate genre that it's already a job filtering it down to the reasonable critiques.
I mean saying that my headline was incendiary is fair. That's just not synonymous with trolling imo?
> I mean saying that my headline was incendiary is fair. That's just not synonymous with trolling imo?
I'm the one who originally used 'trolling' above. The definition of 'trolling' is an interesting question: It's a new meaning for that word (relative to most meanings for most words), it's a loaded word, and an important one. Maybe I should have used a more precise word.
Whether it's 'trolling' or 'incendiary' or 'inflammatory' or 'link bait' or etc. - even if unintentionally - the result is the same. That's out of bounds for HN titles. If you want a sense of HN's approach, see these comments by moderator dang:
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...
I'm the one who originally used 'trolling' above. The definition of 'trolling' is an interesting question: It's a new meaning for that word (relative to most meanings for most words), it's a loaded word, and an important one. Maybe I should have used a more precise word.
Whether it's 'trolling' or 'incendiary' or 'inflammatory' or 'link bait' or etc. - even if unintentionally - the result is the same. That's out of bounds for HN titles. If you want a sense of HN's approach, see these comments by moderator dang:
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...
Ok, useful context. Thanks. (I've never submitted my own link, but it seems my readers do from time to time. I'll try to be mindful of this if it's something I'd like to see posted here.)
The title matches the article's title. If you want it changed suggest a replacement.
If the title contains a gratuitous number or number + adjective, we'd appreciate it if you'd crop it. E.g. translate "10 Ways To Do X" to "How To Do X," and "14 Amazing Ys" to "Ys." Exception: when the number is meaningful, e.g. "The 5 Platonic Solids."
Otherwise please use the original title, unless it is misleading or linkbait; don't editorialize.
https://news.ycombinator.com/newsguidelines.html
Otherwise please use the original title, unless it is misleading or linkbait; don't editorialize.
https://news.ycombinator.com/newsguidelines.html
Thanks for the quote. My original point about 'trolling' should have said 'linkbait'.
It's both.
I edited the title, I usually defer to the guidelines and leave the original title as much as possible. This does seem to be too inflammatory though.
The titles are matching for me.
I agree. Trolling / inflammatory language in titles should be changed, per the guidelines (and I think it's a good idea).
The whole thing is yet another Internet rant.
The whole thing is yet another Internet rant.
dwt204(1)
rhacker(2)
> Delaying a tax is not avoiding a tax.
Stepping-up the basis amounts to exactly that, and is unfortunately not mentioned in the article. Too bad the author doesn't have friends in finance to challenge his thinking.
Stepping-up the basis amounts to exactly that, and is unfortunately not mentioned in the article. Too bad the author doesn't have friends in finance to challenge his thinking.
Which article and author are you referring to? The Substack ... er ... rant, or ProPublica's piece it's responding to?
(Qualify your pronouns and referants, peeps.)
(Qualify your pronouns and referants, peeps.)
So the focus of the article should have been on eliminating the step up basis (which ProPublica admitted is a bipartisan thing to do) or other ways of avoiding capital gains tax rather than conflating tax avoidance with tax deferral. And all the activities they complained about billionaires doing are things that the middle class can relate to too: deferring taxes (401(k)), avoiding taxes using step up in basis and $500k home gain exemption, borrowing on paper wealth without realizing gains (HELOC).
OP here. Just replied to this elsewhere. Step-up is just to avoid double taxation. Estate taxes are at a 2x rate (vs. LTCG) for assets above the baseline ($1m + exemptions etc).
I'm confused by the notion that "double taxation" is something this is obviously to be avoided.
Let's say that a billionaire sells $1 billon of appreciated stock a year before their death, and pays the full capital gains tax on it. They die, and their heirs inherit the $1 billion of cash. Would you argue that it would be unfair for these heirs to have to pay an additional inheritance tax on this because this would be "double taxation"?
Presumably not, or if you did, presumably it would be because you believe that inheritance tax is inherently bad, and not because the tax was already payed. Alternatively, consider the same scenario where the was no capital gains, and instead the stock was sold at the same value it was purchased at.
This isn't to mean your conclusion is necessarily wrong, but I think you should look closer at your argument to see if it's as strong as it should be.
Let's say that a billionaire sells $1 billon of appreciated stock a year before their death, and pays the full capital gains tax on it. They die, and their heirs inherit the $1 billion of cash. Would you argue that it would be unfair for these heirs to have to pay an additional inheritance tax on this because this would be "double taxation"?
Presumably not, or if you did, presumably it would be because you believe that inheritance tax is inherently bad, and not because the tax was already payed. Alternatively, consider the same scenario where the was no capital gains, and instead the stock was sold at the same value it was purchased at.
This isn't to mean your conclusion is necessarily wrong, but I think you should look closer at your argument to see if it's as strong as it should be.
I just mean that so far as the invention/calibration of the taxes, the idea was that a high estate tax would offset the reset of capital gains. I don't have a strong position on whether the laws do this well or make full sense etc.
Though I'll note that the scenario you pose never really happens. A billionaire isn't going to cash out a billion dollars of stock just to have cash to sit on. They're either doing it to spend in on consumption (nothing to inherit anyway) or to buy a different asset that would itself have capital gains assigned.
Though I'll note that the scenario you pose never really happens. A billionaire isn't going to cash out a billion dollars of stock just to have cash to sit on. They're either doing it to spend in on consumption (nothing to inherit anyway) or to buy a different asset that would itself have capital gains assigned.
This only applies to inheritance, right?
That's the point. Delay your taxes to the point they become inheritance, and you can avoid some of them entirely.
You're inheritor won't avoid them though so it's kind of a moot point. Even a trust will get taxed as money is withdrawn.
Damage control.
Does anyone know who the author, "Jeremy Arnold" is, and what the "Save Journalism Committee" is and who backs them? Their about page doesn't say who they are:
https://savingjournalism.substack.com/p/what-this-newsletter...
Also, why should I or do you trust them over ProPublica? These ranting-style articles are written as if the author possesses the Truth, but analogous to the XKCD about technical standards, all we have is one more point of view.
To me, at this point in Internet history, the ranting, ridiculing style is a strong negative signal. Also, criticism of Silicon Valley billionaires seems to draw responses that try to discredit the news media. (I always wonder: Where then do they get news?)
[Edited slightly for politeness.]
https://savingjournalism.substack.com/p/what-this-newsletter...
Also, why should I or do you trust them over ProPublica? These ranting-style articles are written as if the author possesses the Truth, but analogous to the XKCD about technical standards, all we have is one more point of view.
To me, at this point in Internet history, the ranting, ridiculing style is a strong negative signal. Also, criticism of Silicon Valley billionaires seems to draw responses that try to discredit the news media. (I always wonder: Where then do they get news?)
[Edited slightly for politeness.]
OP here. Happy to answer direct questions as you have them.
It's a self-funded project. As for trust, I pay bounties for corrections for a reason. And I keep a public list of all past bounties paid. Readers can review and decide how much to trust accordingly.
It's a self-funded project. As for trust, I pay bounties for corrections for a reason. And I keep a public list of all past bounties paid. Readers can review and decide how much to trust accordingly.
Welcome! Thanks for dropping in.
Sorry to grill you when we just met, but what is your background, if you are willing to share publicly (I understand if not)? I just like to know who I am reading, especially on the Internets!
Sorry to grill you when we just met, but what is your background, if you are willing to share publicly (I understand if not)? I just like to know who I am reading, especially on the Internets!
Grilling is cool. TLDR is I'm a copywriter turned comms consultant. I work mostly with tech companies. My interest in journalism review came just from years of diving into stories on topics I knew and finding them grotesquely misrepresented. This then kicked up a gear when I wrote about Elon Musk and the Thai cave rescue in 2018 and had a bunch of newspapers/journalists shit on my work. I wrote an exhaustive rebuttal to all their points (and offered them money for any mistakes they could find) and they just didn't read it. I came to realize that they have the privilege of just never having to engage with criticism no matter how rendered. So I started my substack to effectively pre-publish chapters of a book I'm writing with a list of examples of really bad journalism from top outlets. Then going to segue from that to my own journalism-esque platform to put my money where my mouth is a far as building a news org with better incentives and more accountability.
Thanks for such a frank response.
> building a news org with better incentives and more accountability
Interesting. How do you envision changing incentives and accountability?
> I came to realize that they have the privilege of just never having to engage with criticism no matter how rendered.
I think the journalists and news publications receive and address enormous amounts of criticism. I see it all the time. Realistically, they can't address all of it, and yes it's very annoying to be ignored. (But if they wrote about me in particular, got it wrong, and ignored my response, that would be especially infuriating.)
> I wrote about Elon Musk and the Thai cave rescue in 2018
I notice the OP article effectively, if not explicitly, sides with Musk (and others) against ProPublica. Is there a connection?
> building a news org with better incentives and more accountability
Interesting. How do you envision changing incentives and accountability?
> I came to realize that they have the privilege of just never having to engage with criticism no matter how rendered.
I think the journalists and news publications receive and address enormous amounts of criticism. I see it all the time. Realistically, they can't address all of it, and yes it's very annoying to be ignored. (But if they wrote about me in particular, got it wrong, and ignored my response, that would be especially infuriating.)
> I wrote about Elon Musk and the Thai cave rescue in 2018
I notice the OP article effectively, if not explicitly, sides with Musk (and others) against ProPublica. Is there a connection?
> How do you envision changing incentives and accountability?
I'm writing a piece about that on Thursday actually. TLDR is a mix of paying for corrections (really just "more correct information flow") and maintaining a super readable changelog. Also a different reader premise. We'll try to present stories almost in the form of Wikipedia, if each page were managed by a really engaging writer with a good grasp of the subject, who was being fed high-quality feedback.
> Realistically, they can't address all of it, and yes it's very annoying to be ignored.
I've written about this pretty extensively, and IMO while I'm sympathetic about all the Twitter hate that some of them get, journalism let go of its public editors for a reason. And it's next to impossible to get a staff editor to seriously review anything no matter how you approach. Their whole culture is "ship and move on" at a deep level. And that kinda-maybe made sense in the paper distro days. But it doesn't really serve the reader now compared to what a truly native digital solution could look like.
> I notice the OP article effectively, if not explicitly, sides with Musk (and others) against ProPublica.
I side with him sometimes, and sometimes I don't. And sometimes where I do I still have a lot to criticize. I ultimately just try to call balls and strikes (with the correction policy keeping me honest). But as a rule, I think tech journalism is pretty poisoned against rich entrepreneurs now, and that the major corrective work in the info market is explaining how they're getting misrepresented, and why.
I'm writing a piece about that on Thursday actually. TLDR is a mix of paying for corrections (really just "more correct information flow") and maintaining a super readable changelog. Also a different reader premise. We'll try to present stories almost in the form of Wikipedia, if each page were managed by a really engaging writer with a good grasp of the subject, who was being fed high-quality feedback.
> Realistically, they can't address all of it, and yes it's very annoying to be ignored.
I've written about this pretty extensively, and IMO while I'm sympathetic about all the Twitter hate that some of them get, journalism let go of its public editors for a reason. And it's next to impossible to get a staff editor to seriously review anything no matter how you approach. Their whole culture is "ship and move on" at a deep level. And that kinda-maybe made sense in the paper distro days. But it doesn't really serve the reader now compared to what a truly native digital solution could look like.
> I notice the OP article effectively, if not explicitly, sides with Musk (and others) against ProPublica.
I side with him sometimes, and sometimes I don't. And sometimes where I do I still have a lot to criticize. I ultimately just try to call balls and strikes (with the correction policy keeping me honest). But as a rule, I think tech journalism is pretty poisoned against rich entrepreneurs now, and that the major corrective work in the info market is explaining how they're getting misrepresented, and why.
> paying for corrections
Bug bounties for news - great idea. Many eyes make bugs shallow, and news is more 'open source' than code in one respect: it's much more easily and broadly comprehensible.
> We'll try to present stories almost in the form of Wikipedia, if each page were managed by a really engaging writer with a good grasp of the subject, who was being fed high-quality feedback.
Yes! I've thought about that: News sites are still newspapers printed on the web: Articles are generally static. Beyond a few corrections and additions, they don't take advantage of the new medium.
So a Wikipedia-style, continuously updated article would be great. Using the current static articles, if I want to learn about an issue I have to track down and read lots of articles which contain much redundant content. Wikipedia is not reliable. Why isn't there an article from a reliable source with the current state of things?
The one drawback is that readers need a way to learn what changed since their last visit - whether that was an hour ago, yesterday, or a month ago. I'm not re-reading the whole thing and trying to divine the differences. Diffs are too hard to read. A micro-blog of updates is my first approximation solution: Edit it to reconcile updates-of-updates and to prioritize them (a minor correction should be listed behind major new information). 'Here's what happened since you left: ...'
> Their whole culture is "ship and move on" at a deep level. And that kinda-maybe made sense in the paper distro days. But it doesn't really serve the reader now compared to what a truly native digital solution could look like.
I agree, and that's another element I would like to see added: A feedback loop with readers, like any blog would have. The NY Times has the potential to be the forum of real experts and leaders. Imagine an international relations article with comments from former ambassadors, people with direct experience of the immediate situation, even prominent leaders, along with high-quality public comments (higher than anything else on the web - serious comments only); add to that responses from the authors and editor, and appropriate updates to the story. That would be as valuable as the article itself, and the NYT would become the leading forum, arguably the only serious one, on the Internet.
The NYT (and other publications) do themselves a great disservice by allowing comments that are beneath the quality of the article, diluting the content on their sites. If they provided a high-quality, serious discussion forum, experts and leaders may think it's worth their time to participate - and may feel compelled or be left out of the debate.
> public editors
I paid attention to the NY Times' public editors. IME and IIRC, they weren't practicing journalism, they were more like unempowered customer service: They would report information that fell into their laps, not seek and investigate it, and they accepted responses from NY Times' employees in the same way - 'the editor didn't respond', and that was it. I don't miss them.
Maybe it's just too hard to do it politically within the organization. The news organizations do have plenty of outside critics; it's arguably redundant to have an internal one.
> rich entrepreneurs
Hmmm ... hardly victims. Arguably the most powerful people in the world right now. The trend of protecting the rights of the powerful is a bit bizarre to me. The people who need help aren't on Facebook's board.
Bug bounties for news - great idea. Many eyes make bugs shallow, and news is more 'open source' than code in one respect: it's much more easily and broadly comprehensible.
> We'll try to present stories almost in the form of Wikipedia, if each page were managed by a really engaging writer with a good grasp of the subject, who was being fed high-quality feedback.
Yes! I've thought about that: News sites are still newspapers printed on the web: Articles are generally static. Beyond a few corrections and additions, they don't take advantage of the new medium.
So a Wikipedia-style, continuously updated article would be great. Using the current static articles, if I want to learn about an issue I have to track down and read lots of articles which contain much redundant content. Wikipedia is not reliable. Why isn't there an article from a reliable source with the current state of things?
The one drawback is that readers need a way to learn what changed since their last visit - whether that was an hour ago, yesterday, or a month ago. I'm not re-reading the whole thing and trying to divine the differences. Diffs are too hard to read. A micro-blog of updates is my first approximation solution: Edit it to reconcile updates-of-updates and to prioritize them (a minor correction should be listed behind major new information). 'Here's what happened since you left: ...'
> Their whole culture is "ship and move on" at a deep level. And that kinda-maybe made sense in the paper distro days. But it doesn't really serve the reader now compared to what a truly native digital solution could look like.
I agree, and that's another element I would like to see added: A feedback loop with readers, like any blog would have. The NY Times has the potential to be the forum of real experts and leaders. Imagine an international relations article with comments from former ambassadors, people with direct experience of the immediate situation, even prominent leaders, along with high-quality public comments (higher than anything else on the web - serious comments only); add to that responses from the authors and editor, and appropriate updates to the story. That would be as valuable as the article itself, and the NYT would become the leading forum, arguably the only serious one, on the Internet.
The NYT (and other publications) do themselves a great disservice by allowing comments that are beneath the quality of the article, diluting the content on their sites. If they provided a high-quality, serious discussion forum, experts and leaders may think it's worth their time to participate - and may feel compelled or be left out of the debate.
> public editors
I paid attention to the NY Times' public editors. IME and IIRC, they weren't practicing journalism, they were more like unempowered customer service: They would report information that fell into their laps, not seek and investigate it, and they accepted responses from NY Times' employees in the same way - 'the editor didn't respond', and that was it. I don't miss them.
Maybe it's just too hard to do it politically within the organization. The news organizations do have plenty of outside critics; it's arguably redundant to have an internal one.
> rich entrepreneurs
Hmmm ... hardly victims. Arguably the most powerful people in the world right now. The trend of protecting the rights of the powerful is a bit bizarre to me. The people who need help aren't on Facebook's board.
> TLDR is I'm a copywriter turned comms consultant. I work mostly with tech companies.
Heh. Cui bono, am I right?
Heh. Cui bono, am I right?
They didn’t engage with your criticism. Resist the temptation to extrapolate that to conclusions beyond yourself. The idea that as a profession journalists don’t engage with criticism is so demonstrably false it’s absurd. The entire editorial process is engaging with criticism, and it very often comes from outside the newsroom. On a story of this magnitude, that criticism is invited as a matter of policy before publishing (it’s called red teaming). Quite often, that process leads to rereporting, sometimes by another group.
You seem to have emotionally reacted to criticism of your own work (which is par for journalism) by declaring that journalism doesn’t get it and needs to be “saved” (from who?). I’m concerned by your personification of a bad experience and the malevolence you’re ascribing to an entire profession as a result, while on the way to sticking your fingers in the same pie. You are coming across as an unreliable narrator in several ways. Even beyond that, you’re going up against ProPublica, not Daily Mail, and it’s very clear from your piece (which I read end to end) that you dove into it in bad faith looking for your intended outcome.
It is this comment alone that convinces me you will fail, because you don’t understand why you weren’t engaged and why a lengthy rebuttal to incoming was a waste of your time. You seem to have a chip on your shoulder based on writing about Elon and the Thai thing and not having it go as you’d like which, in the grand scheme of things, matters precisely zero. That you offered money to those journalists as part of that process simply reassures me that you were blocked in their email because that is a fucking stupid thing to do, and I wish that were more apparent to you. You did dumb things by your own account. That almost certainly wasn’t personal — it’s just that money and its involvement in journalism is extremely sensitive for very, very obvious reasons.
Source: Journalist.
You seem to have emotionally reacted to criticism of your own work (which is par for journalism) by declaring that journalism doesn’t get it and needs to be “saved” (from who?). I’m concerned by your personification of a bad experience and the malevolence you’re ascribing to an entire profession as a result, while on the way to sticking your fingers in the same pie. You are coming across as an unreliable narrator in several ways. Even beyond that, you’re going up against ProPublica, not Daily Mail, and it’s very clear from your piece (which I read end to end) that you dove into it in bad faith looking for your intended outcome.
It is this comment alone that convinces me you will fail, because you don’t understand why you weren’t engaged and why a lengthy rebuttal to incoming was a waste of your time. You seem to have a chip on your shoulder based on writing about Elon and the Thai thing and not having it go as you’d like which, in the grand scheme of things, matters precisely zero. That you offered money to those journalists as part of that process simply reassures me that you were blocked in their email because that is a fucking stupid thing to do, and I wish that were more apparent to you. You did dumb things by your own account. That almost certainly wasn’t personal — it’s just that money and its involvement in journalism is extremely sensitive for very, very obvious reasons.
Source: Journalist.
> Source: Journalist.
fyi: The commenter says below, in a dead comment, "The best part is that I made up that I’m a journalist just to screw with you .... I’m a product manager at a FAANG, dude, and I screw around on this forum for fun."
fyi: The commenter says below, in a dead comment, "The best part is that I made up that I’m a journalist just to screw with you .... I’m a product manager at a FAANG, dude, and I screw around on this forum for fun."
I feel like this response kind of misses the point of the bigger issue, and subserviently plays into the elitist constructs of society built up over the past few decades.
Like obviously the super rich legally avoid paying taxes using intricate loopholes, but that doesn't mean people shouldn't bring up the fact that the entire system is screwed up. The article's primary criticism of ProPublica is premised around the fact that these loopholes exist, and that they're legal....but doesn't give consideration to how absurd they are. (not talking about taxing unrealized gains, that's just idiotic) I don't have an issue with how they framed this.
If the author is going to call out bad journalism, he should focus on the media conglomerates being taken over by de-facto communists...pushing leftist propaganda from the top down (CNN, NBC, ABC, NYT, etc). And the sad thing is, people on the left can't see it because what the MSM selectively reports plays into their worldview. What a fucking travesty.
Like obviously the super rich legally avoid paying taxes using intricate loopholes, but that doesn't mean people shouldn't bring up the fact that the entire system is screwed up. The article's primary criticism of ProPublica is premised around the fact that these loopholes exist, and that they're legal....but doesn't give consideration to how absurd they are. (not talking about taxing unrealized gains, that's just idiotic) I don't have an issue with how they framed this.
If the author is going to call out bad journalism, he should focus on the media conglomerates being taken over by de-facto communists...pushing leftist propaganda from the top down (CNN, NBC, ABC, NYT, etc). And the sad thing is, people on the left can't see it because what the MSM selectively reports plays into their worldview. What a fucking travesty.
>Like obviously the super rich legally avoid paying taxes using intricate loopholes
Not paying taxes on unrealized gains is an intricate loophole? You can take advantage of it right now by buying stocks and... holding on to them.
>bring up the fact that the entire system is screwed up
We think the system is screwed up, so let's use any sort of misrepresentation we can to help our narrative. After all, the ends justifies the means right?
Not paying taxes on unrealized gains is an intricate loophole? You can take advantage of it right now by buying stocks and... holding on to them.
>bring up the fact that the entire system is screwed up
We think the system is screwed up, so let's use any sort of misrepresentation we can to help our narrative. After all, the ends justifies the means right?
> What happens when journalists don't have any friends in finance to challenge their thinking?
I have a basic theory that 'journalists' don't generally understand math or finance. For one, if they did, they wouldn't choose to become journalists. As a result, they surround themselves with a bubble of low math and finance skills and are prone to misunderstand and conflate basic concepts like assets and income.
I have a basic theory that 'journalists' don't generally understand math or finance. For one, if they did, they wouldn't choose to become journalists. As a result, they surround themselves with a bubble of low math and finance skills and are prone to misunderstand and conflate basic concepts like assets and income.
It's rather amazing to see so many people complaining about being told that the rich aren't paying their fair share of taxes. That's the central premise here and it gets lost through all this muttering about technical detail.
The richest Americans aren't paying their fair share of taxes. That's the story. That's the central truth we should be talking about, but instead we want to spend time complaining about a bunch of periphery minutiae.
The privacy angle is also distraction. Public figures should enjoy less privacy than the rest of us. That's not just my opinion, it's basically a given in societies that care about holding their powerful to account.
Was the Pro Publica piece a hit piece? Maybe, but I don't care, because once again the central premise is indisputable. Rich Americans don't pay their fair share of taxes. We should be 'hitting' them.
The richest Americans aren't paying their fair share of taxes. That's the story. That's the central truth we should be talking about, but instead we want to spend time complaining about a bunch of periphery minutiae.
The privacy angle is also distraction. Public figures should enjoy less privacy than the rest of us. That's not just my opinion, it's basically a given in societies that care about holding their powerful to account.
Was the Pro Publica piece a hit piece? Maybe, but I don't care, because once again the central premise is indisputable. Rich Americans don't pay their fair share of taxes. We should be 'hitting' them.
> > We understand that nearly everyone who provides material to a reporter is doing so in ways that reflect their worldview, agenda or biases. We have long held that those motives are irrelevant if the information is reliable.
> This is an … insane statement? — both rationally and morally. Truth can't ever be a sole criteria for publishing. It's necessary, but not sufficient. To suggest otherwise ought to flunk someone out of first year journalism school.
This is a misinterpretation of the quoted text. Propublica says that the motive of the source is not part of the set of criteria for publishing (unless it the information is unreliable), not that reliability is the sole criterion for publishing. Propublica's article explicitly says that privacy is a legitimate concern. "One of the billionaires mentioned in this article objected, arguing that publishing personal tax information is a violation of privacy. We have concluded that the public interest in knowing this information at this pivotal moment outweighs that legitimate concern."