We are publishing the tax secrets of the .001%(propublica.org)
propublica.org
We are publishing the tax secrets of the .001%
https://www.propublica.org/article/why-we-are-publishing-the-tax-secrets-of-the-001
580 comments
In Finland, everyone's taxable income is a matter of public record. One theoretical benefit of such a policy is that it eliminates information asymmetries between workers and employers in wage bargaining.
Interesting. It seems to work for Finland. In some countries it would probably make you a kidnapping target.
You become a kidnapping target by being rich, whether that's a matter of public record or just someone cruising the wealthier neighbourhoods is arbitrary.
I mean over here you can't look up who makes how much, but the rough value of houses and neighbourhoods, which is used to determine property taxes, is public record.
I'm sure there's some rich people / families living in otherwise underwhelming houses, but they're generally a minority.
I mean over here you can't look up who makes how much, but the rough value of houses and neighbourhoods, which is used to determine property taxes, is public record.
I'm sure there's some rich people / families living in otherwise underwhelming houses, but they're generally a minority.
Per The Millionaire Next Door (see https://www.amazon.com/Millionaire-Next-Door-Surprising-Amer... for the link), most wealthy are those who have a reasonable income but good financial discipline.
Which means that a shocking number of millionaires live in poor neighborhoods and have modest lifestyles.
Those aren't the super-wealthy, of course. But most wealthy people can't be identified by where they live.
Which means that a shocking number of millionaires live in poor neighborhoods and have modest lifestyles.
Those aren't the super-wealthy, of course. But most wealthy people can't be identified by where they live.
The millionaire next door uses an artificially low threshold for wealth. It’s not a book about the wealthy, it’s largely a book about retirement. 1M is only generating ~40k per year, if that’s your savings you can’t afford to live in an affluent area without a job.
That book was originally written decades ago. Its threshold corresponds to about $1.7 million in savings in today's world. Their median was $1.6 million, or about $2.7 million in today's dollars.
And given that the people who attained that status on average lived in cheap neighborhoods, the fact that their income wouldn't stretch long in an affluent neighborhood isn't really a concern for them.
And given that the people who attained that status on average lived in cheap neighborhoods, the fact that their income wouldn't stretch long in an affluent neighborhood isn't really a concern for them.
Even adjusting for inflation from 1996 half the population had 1.0 - 1.6 million.
That translates to ~$1.7M - 2.7M, or an income of ~68k to 108k which is still not that significant.
That translates to ~$1.7M - 2.7M, or an income of ~68k to 108k which is still not that significant.
Where do you get half the population from?
According to the statistics that they gave, an estimated 3.5 million Americans were that wealthy. In 1996 the US population was around 270 million so we're talking about the top 1.3% of Americans by net worth.
For more about what this group looked like, read https://www.washingtonpost.com/wp-srv/style/longterm/books/c....
According to the statistics that they gave, an estimated 3.5 million Americans were that wealthy. In 1996 the US population was around 270 million so we're talking about the top 1.3% of Americans by net worth.
For more about what this group looked like, read https://www.washingtonpost.com/wp-srv/style/longterm/books/c....
That’s what a a median of $1.6 million and a minimum of 1.0 million means. Half of their population was 1.0 to 1.6 Million the other half was over 1.6 million.
> Those aren't the super-wealthy, of course. But most wealthy people can't be identified by where they live.
This is particularly true for intergenerational wealth. I grew up in a area with fair number of affluent households. You couldn't realize it until you became familiar the community.
This is particularly true for intergenerational wealth. I grew up in a area with fair number of affluent households. You couldn't realize it until you became familiar the community.
> I'm sure there's some rich people / families living in otherwise underwhelming houses, but they're generally a minority.
There are more than you think. Pretty much every city has a nice neighborhood where the wealthy residents live. The difference between someone worth $10mm vs someone worth $100mm is not visible from the street.
There are more than you think. Pretty much every city has a nice neighborhood where the wealthy residents live. The difference between someone worth $10mm vs someone worth $100mm is not visible from the street.
Does that difference matter when kidnapping? Its not like the 100mm person has more money readily available, as they'll likely both have the bulk invested/tied up in some way.
You can only get their fluid money which is probably quite similar in a time sensitive situation like that.
You can only get their fluid money which is probably quite similar in a time sensitive situation like that.
when someone has a gun to your childs head, i dont think you will be thinking about longer term or short term capital gains
I would assume someone with $100mm in assets has more of it in liquid assets than someone with $10mm in assets (a large amount of which would be their home).
The solution to this is to eliminate wealth disparity.
Maybe. But how?
I think that, if you could somehow collect all the wealth and redistribute it equally, within a few years we would see disparity reappear. Some folks are better at accumulating wealth than others.
It seems to me that you would have to keep reallocating wealth. And many would then ask, what's the motive for generating wealth if it's just going to be taken away from you?
I think that, if you could somehow collect all the wealth and redistribute it equally, within a few years we would see disparity reappear. Some folks are better at accumulating wealth than others.
It seems to me that you would have to keep reallocating wealth. And many would then ask, what's the motive for generating wealth if it's just going to be taken away from you?
This has happened before.
After the end of WW2, the Allies decided to repudiate the ReichsMark (the German dollar) and issue a new Mark. Everyone who held ReichsMarks saw it go to zero. To get the economy going again, everyone was issued 50 of the new Deutsch Marks.
Within a couple weeks, the people who had been wealthy before were rapidly moving ahead, and the ones who had not been were again at the bottom.
I.e. the people who knew how to make money still knew how to make money, and the people who didn't still didn't.
After the end of WW2, the Allies decided to repudiate the ReichsMark (the German dollar) and issue a new Mark. Everyone who held ReichsMarks saw it go to zero. To get the economy going again, everyone was issued 50 of the new Deutsch Marks.
Within a couple weeks, the people who had been wealthy before were rapidly moving ahead, and the ones who had not been were again at the bottom.
I.e. the people who knew how to make money still knew how to make money, and the people who didn't still didn't.
I'm not familiar with this case study but was wouldn't that be due to retaining asset ownership? Even if the dollar became worthless, presumably I'd still control all my assets(the stocks in my brokerage/401k, my car, etc.). The companies I have ownership for would still be able to generate goods/services for Dollar2.0
People storing money under their mattress presumably were in trouble, but doing that already puts you at risk of devaluation through inflation. And I'd imagine that most wealthy people are wealthy because they do exactly the opposite and hold assets instead of currency.
People storing money under their mattress presumably were in trouble, but doing that already puts you at risk of devaluation through inflation. And I'd imagine that most wealthy people are wealthy because they do exactly the opposite and hold assets instead of currency.
Consider, for example, that Berlin was bombed flat. Every industrial area was bombed. The houses were carpet bombed. The remaining factories were boxed up and shipped to the Soviet Union. The rest was looted by the troops. The young men were dead or in POW camps.
The people that told me this story were in Berlin at the time.
The people that told me this story were in Berlin at the time.
Or, anyone with significant enough wealth had already diversified to gold and stashed it in Switzerland. Not too conspicuously as you wouldn't want to draw the attention of the Gestapo on your "short" but enough to be in a better position for a fresh start, than a 50 DM.
This is why the system has to be designed to prevent concentrations of wealth or power.
How? (I'm not trolling, I'm sincerely curious. I respect and appreciate your viewpoint pmoriarty even though I don't always agree with you.)
I feel like it's probably a bad idea to let individuals acquire so much wealth and power that they rival some nations, yet I haven't been able to frame an ethical way to prevent it if the "0.001%" have acquired their wealth legitimately, that is, by the rules we all must follow.
I feel like it's probably a bad idea to let individuals acquire so much wealth and power that they rival some nations, yet I haven't been able to frame an ethical way to prevent it if the "0.001%" have acquired their wealth legitimately, that is, by the rules we all must follow.
There are two ways: redistribution, and state control of production.
> And many would then ask, what's the motive for generating wealth if it's just going to be taken away from you?
The same motivation that drives some folks to study e.g. philosophy, even though it's perfectly well known that this will never make you rich: Because they like it.
You don't just e.g. found a company for the sake of money - you also do it because it allows you to do things on your own terms, it gives you prestige, it gives you the satisfaction of being 'successful'. In todays day and age, this is usually equivalent with 'generating wealth', but I'm a firm believer that this does not necessarily have to be the case.
The same motivation that drives some folks to study e.g. philosophy, even though it's perfectly well known that this will never make you rich: Because they like it.
You don't just e.g. found a company for the sake of money - you also do it because it allows you to do things on your own terms, it gives you prestige, it gives you the satisfaction of being 'successful'. In todays day and age, this is usually equivalent with 'generating wealth', but I'm a firm believer that this does not necessarily have to be the case.
I find it absolutely fascinating that your arguments are shot down on this board, because it's business, but that is literally what you're told on a constant basis if you want to go into the education field in the US.
You don't do it for the paycheck, you do it because you like it. Why education, social work, and other human services fields, but not business? That is odd to me.
You don't do it for the paycheck, you do it because you like it. Why education, social work, and other human services fields, but not business? That is odd to me.
> I find it absolutely fascinating that your arguments are shot down on this board, because it's business, but that is literally what you're told on a constant basis if you want to go into the education field in the US.
It’s not actually that fascinating, and has a simple explanation: the people saying this about teachers are not the same people that are commenting here. It’s a non-sequitur.
The notion that educators (or anyone else for that matter) ought to accept bad pay or working conditions because of “passion” is completely objectionable. Teachers should be well-compensated for the important and difficult work they do.
It’s not actually that fascinating, and has a simple explanation: the people saying this about teachers are not the same people that are commenting here. It’s a non-sequitur.
The notion that educators (or anyone else for that matter) ought to accept bad pay or working conditions because of “passion” is completely objectionable. Teachers should be well-compensated for the important and difficult work they do.
I’m not so sure. Running a business exposes you to tremendous personal risk, especially in a litigious country like the US. It’s also incredibly hard, most often fails, and typically confers less prestige than other much more reliable and substantially less risky high paying career paths (finance, law, medicine, consulting, etc).
Folks who want to start and run a business and give away their profit can already do so. E.g. Warren Buffet gives away half his wealth voluntarily. Or take the case of Dan Price https://en.wikipedia.org/wiki/Dan_Price
Is it ethical to force people to give up against their will money that they (presumably) earned "fair and square"?
Assuming we find that ethical formula (which seems dubious to me but let it ride for the sake of discussion) the next question is, would the people willing to work under that system be "enough"? And then we have to ask "enough for what purpose?"
That gets into ethical and speculative issues that cut right to the heart of the human condition. Wendell Berry asked, "What are people for?" Bucky Fuller calculated that we could bring about a secular utopia for ~$25 billion by sometime in the 1970's if we applied our technology efficiently to supplying our physical needs. I'm open to the idea that we don't need open-ended profit motive to create a good and worthwhile global society (in fact even Adam Smith thought the capitalist "greed is good" phase would be just that: a temporary phase between the old system and the new.)
Is it ethical to force people to give up against their will money that they (presumably) earned "fair and square"?
Assuming we find that ethical formula (which seems dubious to me but let it ride for the sake of discussion) the next question is, would the people willing to work under that system be "enough"? And then we have to ask "enough for what purpose?"
That gets into ethical and speculative issues that cut right to the heart of the human condition. Wendell Berry asked, "What are people for?" Bucky Fuller calculated that we could bring about a secular utopia for ~$25 billion by sometime in the 1970's if we applied our technology efficiently to supplying our physical needs. I'm open to the idea that we don't need open-ended profit motive to create a good and worthwhile global society (in fact even Adam Smith thought the capitalist "greed is good" phase would be just that: a temporary phase between the old system and the new.)
Economies based on this idea tend to do very poorly.
For one thing, people won't have money to invest in new ventures.
For one thing, people won't have money to invest in new ventures.
Why stop at eliminating wealth disparity when you can eliminate wealth?
This has been demonstrated feasible! We can all be similarly poor together.
Same thing, the only way to eliminating wealth disparity is to eliminate wealth.
The Authoritarian Left that goes on and on about eliminating wealth disparity has no interest in lifting everyone up to be wealthy, not they want to seize the wealth and drag anyone down they deem is "too wealthy"
Which is ironically always someone more wealthy than the person advocating for wealth redistribution, for example Bernie Sanders used to talk about "millionaires and billionaires" until he became a millionaire, now like magic only billionaires are a problem for him
The Authoritarian Left that goes on and on about eliminating wealth disparity has no interest in lifting everyone up to be wealthy, not they want to seize the wealth and drag anyone down they deem is "too wealthy"
Which is ironically always someone more wealthy than the person advocating for wealth redistribution, for example Bernie Sanders used to talk about "millionaires and billionaires" until he became a millionaire, now like magic only billionaires are a problem for him
You know being a millionaire today has a massively different meaning than 20 years ago.
What? Now you're making me feel old. I remember 20 years ago... it didn't seem that different from today. What's "massively different" about being a millionaire then? You mean, inflation-adjusted, how it's $1.5 million today?
you still get get to retire in comfort, but you don't get invited to the really swank parties
seriously - maybe narcissism isn't the best character trait to structure your society around?
seriously - maybe narcissism isn't the best character trait to structure your society around?
The tax system is part and parcel with inequality.
The kidnapping problem is on a whole other level.
Denmark is known for "leaving babies in strollers outside of cafes". The Nordic social-liberal countries (Finland included) solve this problem not by opacity but by having social support and trust.
Denmark is known for "leaving babies in strollers outside of cafes". The Nordic social-liberal countries (Finland included) solve this problem not by opacity but by having social support and trust.
I know that, but you mostly don't get to choose whether you live in such a country or not. Everyone would choose to live in a country like that if they could.
I think the point is, that the society as a whole should support public tax records. Finland (and Sweden) does.
Dumb person here. What is "leaving babies in strollers outside of cafes"?
When going into a cafe to order something, they leave their child (in a stroller) outside with the (allegedly justified) expectation that nothing bad will happen to it. (To be fair, babies aren't especially easy to liquidate if stolen, and strollers are inconveniently bulky, so this arguably says less about the amount of crime than about how petty, blatant, and asinine the criminals are.)
Reminds me of a Michael Moore movie where he goes to Canada, and checks in a neighbourhood whether people lock their main door or not. He litteraly enters a house, and asks directly to the inhabitants: "Why don't you lock your door?". And the canadians answer: "Why should I?"
That makes the lives of gold-diggers easier too.
If it were opt-in that would be fine, otherwise it's an invasion of privacy of most people who aren't rich.
It's almost as bad as having medical conditions and STIs test results listed publicly.
Facilitating public exposure of counting other people's money doesn't help anyone except the rich to know if you can fight them in court or how much to bribe them.
Fight wealth inequality with income-&-holdings-proportional fines; simple, government-calculated graduated taxes without complicated exemptions; elimination of corporate/wealth welfare; and expand economic-advancement-oriented welfare to those who aren't super-rich who can use it.
If it were opt-in that would be fine, otherwise it's an invasion of privacy of most people who aren't rich.
It's almost as bad as having medical conditions and STIs test results listed publicly.
Facilitating public exposure of counting other people's money doesn't help anyone except the rich to know if you can fight them in court or how much to bribe them.
Fight wealth inequality with income-&-holdings-proportional fines; simple, government-calculated graduated taxes without complicated exemptions; elimination of corporate/wealth welfare; and expand economic-advancement-oriented welfare to those who aren't super-rich who can use it.
> If it were opt-in that would be fine
If it were opt-in it would be pointless. Surely that's obvious?
> Facilitating public exposure of counting other people's money doesn't help anyone except the rich to know if you can fight them in court or how much to bribe them.
This is a fair point, but I think these are relatively small individual downsides, which are also much more visible (and potentially addressable). Bribery is probably a harder nut to crack, but the legal system favouring the rich (& lawyered up) is something that one can potentially work toward balancing/mitigating with legislative measures.
If it were opt-in it would be pointless. Surely that's obvious?
> Facilitating public exposure of counting other people's money doesn't help anyone except the rich to know if you can fight them in court or how much to bribe them.
This is a fair point, but I think these are relatively small individual downsides, which are also much more visible (and potentially addressable). Bribery is probably a harder nut to crack, but the legal system favouring the rich (& lawyered up) is something that one can potentially work toward balancing/mitigating with legislative measures.
Funny thing my STI results are shared with my sexual partners and their partners too. It doesn't bother me one bit.
By you and them? Laudable and sensible.
By the government? What business is it of the government to even know who my sexual partner(s) is/are (especially for a negative test result)?
By the government? What business is it of the government to even know who my sexual partner(s) is/are (especially for a negative test result)?
Communicable disease prevention. HIV infections are typically reported to the government, for example, and does not require patient consent (nor does such data sharing incur a HIPPA violation).
> All 50 states require both physicians and laboratories to report to local or state health departments the names of persons newly diagnosed with Centers for Disease Control-defined AIDS [1]. However, because AIDS cases represent onset of the disease caused by HIV, HIV data is necessary to monitor the epidemic.
https://journalofethics.ama-assn.org/article/hiv-and-health-...
> All 50 states require both physicians and laboratories to report to local or state health departments the names of persons newly diagnosed with Centers for Disease Control-defined AIDS [1]. However, because AIDS cases represent onset of the disease caused by HIV, HIV data is necessary to monitor the epidemic.
https://journalofethics.ama-assn.org/article/hiv-and-health-...
We already know, and we knew even before you did. Two of them were sent to test your disclosure practices, and you failed. You're an absolutely terrible person. How dare you!? Good day to you, sir/madame. I said "Good day!"
/s
/s
I disagree almost completely. I understand your concerns - but they are based on weighing personal freedom above all else, and I just don't. I think there's a tradeoff there and it is favorable in favor of disclosing tax information.
To your points:
> gold-diggers
I'm not sure if this is an idiomatic term and out of my grasp, but if you mean that people will get romantically involved with others because of their money... this is a non-issue. Happy to debate it further, but it seems so silly and self-apparent that we shouldn't care at all about it
> Invasion of privacy
Arguably, but as long as only a minimum amount of whats is public, with only the lump-sums published, I think its fine in context.
> It's almost as bad as having medical conditions and STIs test results listed publicly.
I think these are very different things, the difference is not just of severity. They are different classes of things. Financial information relates to money, which only makes sense in a society (money is for trade). A disease's effects are personal. When they aren't, you are obligated to disclose them and/or to comply to other rules (for example, to quarantine).
> Facilitating public exposure of counting other people's money doesn't help anyone except the rich to know if you can fight them in court or how much to bribe them.
I think the experience where this has been applied is precisely the opposite - the rich are the ones affected the most. And - if your justice can be bought, the problem has less to do with the knowledge that the other can't find back and more to do with the legal system in the first place.
> Fight wealth inequality with income-&-holdings-proportional fines; simple, government-calculated graduated taxes without complicated exemptions; elimination of corporate/wealth welfare; and expand economic-advancement-oriented welfare to those who aren't super-rich who can use it.
Can't argue with that, even if I wanted to, in fewer than 15 pages. Complex stuff!
To your points:
> gold-diggers
I'm not sure if this is an idiomatic term and out of my grasp, but if you mean that people will get romantically involved with others because of their money... this is a non-issue. Happy to debate it further, but it seems so silly and self-apparent that we shouldn't care at all about it
> Invasion of privacy
Arguably, but as long as only a minimum amount of whats is public, with only the lump-sums published, I think its fine in context.
> It's almost as bad as having medical conditions and STIs test results listed publicly.
I think these are very different things, the difference is not just of severity. They are different classes of things. Financial information relates to money, which only makes sense in a society (money is for trade). A disease's effects are personal. When they aren't, you are obligated to disclose them and/or to comply to other rules (for example, to quarantine).
> Facilitating public exposure of counting other people's money doesn't help anyone except the rich to know if you can fight them in court or how much to bribe them.
I think the experience where this has been applied is precisely the opposite - the rich are the ones affected the most. And - if your justice can be bought, the problem has less to do with the knowledge that the other can't find back and more to do with the legal system in the first place.
> Fight wealth inequality with income-&-holdings-proportional fines; simple, government-calculated graduated taxes without complicated exemptions; elimination of corporate/wealth welfare; and expand economic-advancement-oriented welfare to those who aren't super-rich who can use it.
Can't argue with that, even if I wanted to, in fewer than 15 pages. Complex stuff!
>>but they are based on weighing personal freedom above all else
and this is largely the primary difference between American Culture /Politics and the rest of the world, specifically European nations
European nations have always been more collectivist in nature, where the US was founded on Individualism, and Individual Freedom.
There are signs that the US is losing this desire, and it saddens me because unlike you I do value personal freedom above all else, and I think the world needs a nation that continues to put personal freedom above everything else.
and this is largely the primary difference between American Culture /Politics and the rest of the world, specifically European nations
European nations have always been more collectivist in nature, where the US was founded on Individualism, and Individual Freedom.
There are signs that the US is losing this desire, and it saddens me because unlike you I do value personal freedom above all else, and I think the world needs a nation that continues to put personal freedom above everything else.
Perhaps they are losing this desire because it doesn't provide the well being it promises? Because personal freedom has become a meme abused by ultra rich to disable any effort to fix systemic problems in the US?
Except that is not true at all by any objective measure. [1]
The Ultra Rich do not use Personal freedom to disable efforts, it uses Government Regulation to disable efforts, the Rich LOVE big government why do you think many billionaires vote Democrat, it enables them to control the economy to ensure the poor are kept poor and dependent on government. In the end we should look to Smash the State, Eat the Rich, and expand personal freedom [2]
[1]https://www.youtube.com/watch?v=4J5s6aZCPSg
[2]https://c4ss.org/content/30085
The Ultra Rich do not use Personal freedom to disable efforts, it uses Government Regulation to disable efforts, the Rich LOVE big government why do you think many billionaires vote Democrat, it enables them to control the economy to ensure the poor are kept poor and dependent on government. In the end we should look to Smash the State, Eat the Rich, and expand personal freedom [2]
[1]https://www.youtube.com/watch?v=4J5s6aZCPSg
[2]https://c4ss.org/content/30085
The problems in the US are primarily due government regulations breaking markets in things like education, medicine, and housing.
The framework of individualism vs. collectivism is a complicated (and pretty fraught!) sociological construct. Scholars hotly debate whether individualism/collectivism applies to individuals, societies, or some mix of the two. Individualism also exists along a spectrum (if it even exists at all!) While there might be some connection here, it seems a vast oversimplification of cultures/individual attitudes to say that GP's view on Finnish taxation mechanics is a direct result of individualism/collectivism.
Sadly all good discussions quickly become more complex than our threshold for undertanding without in deptghresearch...
If you have any good (and brief!) resources on this please post them; I'd like to glance at how deep this discusson goes
If you have any good (and brief!) resources on this please post them; I'd like to glance at how deep this discusson goes
Two important foundational works are Markus and Kitayama's Culture and the self: Implications for cognition, emotion, and motivation, and Triandis' Individualism and Collectivism. I am not a social psychologist so I don't have a really simple introduction that I can recommend (due to lack of familiarity!). But I have seen how, in a related field, overly simplistic and un-nuanced applications of what is actually a pretty complicated framework has lead to shoddy research and bad conclusions. That's why I called it out here.
> think the world needs a nation that continues to put personal freedom above everything else.
And you think that the US does that?
Exercising personal freedom necessitates having the material and mental resources to buy stuff, to be able to move from place to place, to change jobs, etc. It seems to me that a plausible proxy measure for personal freedom is social mobility, the likelihood that you will be better off than your parents. As far as I remember the country with highest social mobility is Denmark.
And you think that the US does that?
Exercising personal freedom necessitates having the material and mental resources to buy stuff, to be able to move from place to place, to change jobs, etc. It seems to me that a plausible proxy measure for personal freedom is social mobility, the likelihood that you will be better off than your parents. As far as I remember the country with highest social mobility is Denmark.
The US has pretty good Social Mobility as well, it is complete myth that the "rich" in the US is stagnate, most of the Billionaires in the US are 1st Generation Billionaires, this highlights there are income and social mobility.
As a personal anecdote, I am many times better of income and wealth wise than my parents even though we have the same education level and seemingly the same income opportunities, yet I have made better choices with my finances (learning from their [bad] example). My sibling is the same. One of my parents has zero retirement savings and will live off SocSec (likely with the assistance of me and my sibling). My other parent has slightly more savings but not by much and has lots of debt, both are within 5 years of SocSec retirement Age
As a personal anecdote, I am many times better of income and wealth wise than my parents even though we have the same education level and seemingly the same income opportunities, yet I have made better choices with my finances (learning from their [bad] example). My sibling is the same. One of my parents has zero retirement savings and will live off SocSec (likely with the assistance of me and my sibling). My other parent has slightly more savings but not by much and has lots of debt, both are within 5 years of SocSec retirement Age
> As a personal anecdote, I am many times better of income and wealth wise than my parents even though we have the same education level and seemingly the same income opportunities
Slightly off topic - I'd wager the overwhelming majority of the HN posters are signficantly better-off than their parents, solely by virtue of being tech-workers. We tend to forget, but at no point in capitalism's history has such a numerous caste of white-collar knowledge workers been so well compensated as we are now
In your case it may well be mostly because of better financial decisions (especially if you are orders of magnitude better off, which is hard to do without consistent investment in any case), but for most of us this is also true just by 'placement luck'
Slightly off topic - I'd wager the overwhelming majority of the HN posters are signficantly better-off than their parents, solely by virtue of being tech-workers. We tend to forget, but at no point in capitalism's history has such a numerous caste of white-collar knowledge workers been so well compensated as we are now
In your case it may well be mostly because of better financial decisions (especially if you are orders of magnitude better off, which is hard to do without consistent investment in any case), but for most of us this is also true just by 'placement luck'
> The US has pretty good Social Mobility as well, it is complete myth that the "rich" in the US is stagnate, most of the Billionaires in the US are 1st Generation Billionaires, this highlights there are income and social mobility.
Most economists of inequality dispute this. As measured by the likelihood that you'll earn more than your parents [1], or that you'll move up the income or wealth distribution compared to where you were born [2], the United States lags significantly behind most other developed nations. Social mobility in the United States is also lower than it has almost ever been.
[1] Chetty et al., The Fading American Dream: Trends in Absolute Income Mobility Since 1940
[2] Piketty, Capital in the Twenty-First Century
Most economists of inequality dispute this. As measured by the likelihood that you'll earn more than your parents [1], or that you'll move up the income or wealth distribution compared to where you were born [2], the United States lags significantly behind most other developed nations. Social mobility in the United States is also lower than it has almost ever been.
[1] Chetty et al., The Fading American Dream: Trends in Absolute Income Mobility Since 1940
[2] Piketty, Capital in the Twenty-First Century
> this is a non-issue.
Who are you to have the gall to claim conclusive knowledge of an unknowable without a shred of evidence? How do you think gold-diggers and con-artists work, hang-around at airports, golf-courses, and investment brokerages waiting for rappers with the most gold chains?
> I think its fine in context.
That's your opinion that you're deciding for other people. It's the only number that matters and yet you're stilling trying hard to trivialize it.
> And - if your justice can be bought,
Nope, you automatically lept entirely in the wrong direction: it's not the justice who can be bought that is the problem, but the rich knowing how to calculate exactly how to exploit and buy-off the poor. Think Indecent Proposal or Bhopal rather than some Western movie about a crooked town sheriff.
Who are you to have the gall to claim conclusive knowledge of an unknowable without a shred of evidence? How do you think gold-diggers and con-artists work, hang-around at airports, golf-courses, and investment brokerages waiting for rappers with the most gold chains?
> I think its fine in context.
That's your opinion that you're deciding for other people. It's the only number that matters and yet you're stilling trying hard to trivialize it.
> And - if your justice can be bought,
Nope, you automatically lept entirely in the wrong direction: it's not the justice who can be bought that is the problem, but the rich knowing how to calculate exactly how to exploit and buy-off the poor. Think Indecent Proposal or Bhopal rather than some Western movie about a crooked town sheriff.
Who are you to have the gall...
Whoa, relax. ISTM GP is probably a typical human. "Gold-diggers" are not and have never been a major threat to reasonably well-adjusted people. For weirdos who temporarily possess more money than they deserve, perhaps "gold-diggers" are a spice of life. Fools and wealth are soon parted, but that's true no matter what gets published.
Whoa, relax. ISTM GP is probably a typical human. "Gold-diggers" are not and have never been a major threat to reasonably well-adjusted people. For weirdos who temporarily possess more money than they deserve, perhaps "gold-diggers" are a spice of life. Fools and wealth are soon parted, but that's true no matter what gets published.
I think you're being downvoted our of tone, rather than content. So let me respond in reverse order, as the first point seems to be the most emotional for you
>Nope, you automatically lept entirely in the wrong direction: it's not the justice who can be bought that is the problem, but the rich knowing how to calculate exactly how to exploit and buy-off the poor. Think Indecent Proposal or Bhopal rather than some Western movie about a crooked town sheriff.
I absolutely think that the core issue is that the legal system can 'be bought', i.e., it can bankrupt people even if they are right. Reforming that shouldn't be completely impossible and would by definition solve the niche problem you are describing. Btw, as a rule _any_ corporation can sue _any_ non-famously rich person and be sure that they threat of litigation costs will weight in their favor. Disclosed tax info worsens nothing from the current status quo.
> That's your opinion that you're deciding for other people.
It is opinion, yes. But all laws are someone's opinion 'deciding for other people'. And I mean absolutely all laws, even the most basic ones like the right to live or to have private property. It's all social constructs, and we decide which ones stand
> Who are you to have the gall to claim conclusive knowledge of an unknowable without a shred of evidence? How do you think gold-diggers and con-artists work, hang-around at airports, golf-courses, and investment brokerages waiting for rappers with the most gold chains?
I must say I'm surprised this issue seems important to you (and again - completely irrelevant to me). I absolutely don't care about something that I've only ever heard about in soap operas and have never, ever, heard of an example that bothered me in real life. I'm curious what makes this a relevant issue in your view, but I understand if its personal and you don't want to explain. But if you don't have any personal biases, let me argue that the problem of gold diggers is primarily a problem for the gold-dug (?). If a rich person doesn't want to marry/have a relationship with a person that only likes them for their money... then don't. I don't care, and I think nobody should
>Nope, you automatically lept entirely in the wrong direction: it's not the justice who can be bought that is the problem, but the rich knowing how to calculate exactly how to exploit and buy-off the poor. Think Indecent Proposal or Bhopal rather than some Western movie about a crooked town sheriff.
I absolutely think that the core issue is that the legal system can 'be bought', i.e., it can bankrupt people even if they are right. Reforming that shouldn't be completely impossible and would by definition solve the niche problem you are describing. Btw, as a rule _any_ corporation can sue _any_ non-famously rich person and be sure that they threat of litigation costs will weight in their favor. Disclosed tax info worsens nothing from the current status quo.
> That's your opinion that you're deciding for other people.
It is opinion, yes. But all laws are someone's opinion 'deciding for other people'. And I mean absolutely all laws, even the most basic ones like the right to live or to have private property. It's all social constructs, and we decide which ones stand
> Who are you to have the gall to claim conclusive knowledge of an unknowable without a shred of evidence? How do you think gold-diggers and con-artists work, hang-around at airports, golf-courses, and investment brokerages waiting for rappers with the most gold chains?
I must say I'm surprised this issue seems important to you (and again - completely irrelevant to me). I absolutely don't care about something that I've only ever heard about in soap operas and have never, ever, heard of an example that bothered me in real life. I'm curious what makes this a relevant issue in your view, but I understand if its personal and you don't want to explain. But if you don't have any personal biases, let me argue that the problem of gold diggers is primarily a problem for the gold-dug (?). If a rich person doesn't want to marry/have a relationship with a person that only likes them for their money... then don't. I don't care, and I think nobody should
> If a rich person doesn't want to marry/have a relationship with a person that only likes them for their money... then don't.
I think the claim is that you don't know whether a person is only interested in you for your money, and that this colors every social interaction you have, romantic or otherwise, with a undertone of worrying that any generosity you display is being exploited by someone who will abandon you the moment the money runs out. Cf fair-weather friends, miserliness, etc.
I think the claim is that you don't know whether a person is only interested in you for your money, and that this colors every social interaction you have, romantic or otherwise, with a undertone of worrying that any generosity you display is being exploited by someone who will abandon you the moment the money runs out. Cf fair-weather friends, miserliness, etc.
> That's your opinion that you're deciding for other people
Others have spoken to your other points, but as for this, yeah, exactly.
We're talking about how we'd organize society (or some aspect of it), the basis of which involves making decisions for other people, in the sense of developing rules that hopefully people will abide by as participants in the society even if they disagree.
Others have spoken to your other points, but as for this, yeah, exactly.
We're talking about how we'd organize society (or some aspect of it), the basis of which involves making decisions for other people, in the sense of developing rules that hopefully people will abide by as participants in the society even if they disagree.
I would also think that this makes neighborhoods less financially diverse. I can’t see someone with a higher than average income moving into a neighborhood knowing that their neighbors might make 1/4th as much. It puts a target on them.
You obviously haven't been to Finland.
In Scandinavia, the approach to other person earning couple of times more than you could be summarized by "good for you".
In Scandinavia, the approach to other person earning couple of times more than you could be summarized by "good for you".
That's good it works that way in Finland, but my point was focused on the United States. I don't think making everyones' income public would suddenly make those in the US think like those in Finland. I also think the social services in Finland raise the bar for everyone - everyone has more basic services than in the United States, so it starts off more equal.
This happens with any disparity - education, income, wealth. Differences in these cause some people to act differently. I've met many people who think earning $100,000 a year qualifies you as "rich", and there are a lot of people who think they won't have anything in common with someone who is educated beyond undergrad.
I imagine it would suddenly be a metric on Zillow and Realtor - "average neighborhood income". People would self-select based on that, making neighborhoods less financially diverse. No one would want to be seen as the broke person in the neighborhood, and no one would want to way over-buy the neighborhood. Maybe you would, but people would "know" whether you could afford to live there or whether you were taking a house from someone else when you could afford to live in a nicer place. Either way, it would not be comfortable, not to mention if you lived somewhere for a while and your career took off - you'd then maybe out earn the neighborhood and be forced to move, rather than be able to remain and blend in.
On my earlier comment, I guess 1/4 wasn't the right ratio. My point was more that someone making 200k may not move into a neighborhood where the average income is 50k, when they otherwise would have, because they would be viewed very differently among neighbors and it would be hard to blend in. This would lessen tax revenue for low-income areas as people would be less willing to move in.
In general, talking about salary in the States is taboo, but not among hourly workers. If you hear a conversation about work between hourly workers, it generally comes out pretty quickly what they are making. I read an article stating it happens for price discovery - they mention it regularly so they can charge the right rates and work at the highest paying location.
This happens with any disparity - education, income, wealth. Differences in these cause some people to act differently. I've met many people who think earning $100,000 a year qualifies you as "rich", and there are a lot of people who think they won't have anything in common with someone who is educated beyond undergrad.
I imagine it would suddenly be a metric on Zillow and Realtor - "average neighborhood income". People would self-select based on that, making neighborhoods less financially diverse. No one would want to be seen as the broke person in the neighborhood, and no one would want to way over-buy the neighborhood. Maybe you would, but people would "know" whether you could afford to live there or whether you were taking a house from someone else when you could afford to live in a nicer place. Either way, it would not be comfortable, not to mention if you lived somewhere for a while and your career took off - you'd then maybe out earn the neighborhood and be forced to move, rather than be able to remain and blend in.
On my earlier comment, I guess 1/4 wasn't the right ratio. My point was more that someone making 200k may not move into a neighborhood where the average income is 50k, when they otherwise would have, because they would be viewed very differently among neighbors and it would be hard to blend in. This would lessen tax revenue for low-income areas as people would be less willing to move in.
In general, talking about salary in the States is taboo, but not among hourly workers. If you hear a conversation about work between hourly workers, it generally comes out pretty quickly what they are making. I read an article stating it happens for price discovery - they mention it regularly so they can charge the right rates and work at the highest paying location.
But earning couple of times less lol? ) I don't think anyone at all wants live in a place where most people earn a lot less than themselves.
maybe in extremes. like 100:1, but 2:1, 3:1 doesn't seem that bad... honestly better for social cohesion
I can pretty much guarantee that in the semi-rural town where I live, there are households that are probably down around median US income (~$50K) and households making hundreds of thousands of dollars or more.
In my rural area, I was one of the rich people in our area (combined dual income from my spouse and I of around 80-90k/year). People used to give me shit for being Richie Rich (all in good fun). The income level around here hovers around 100-150% of the standard federal poverty level. Generally, most people are lower income, with some people making 100k plus. But, everyone sort of lives the same life; we hang out in the same places, our kids go to the same schools, that sort of thing.
Then real wealth started moving in to buy property as investments. Now we have people who have gates and armed guards. They have private police to scare the locals. They harass school board members for access to school vouchers for the private schools they are starting so their kids don't have to attend the public schools.
It's different around here now. It's a lot less 'community' and all it took was about a half dozen really wealthy folks to upset the apple cart.
Nobody jokes about money anymore in any context, and people seem to be a lot less happy than they used to be just in general.
Then real wealth started moving in to buy property as investments. Now we have people who have gates and armed guards. They have private police to scare the locals. They harass school board members for access to school vouchers for the private schools they are starting so their kids don't have to attend the public schools.
It's different around here now. It's a lot less 'community' and all it took was about a half dozen really wealthy folks to upset the apple cart.
Nobody jokes about money anymore in any context, and people seem to be a lot less happy than they used to be just in general.
Nah. A lot of people care about trashiness and culture much more. And boy that does not correlate with bank account.
It seems really weird not to have neighbors with different incomes. There would have to be really over-the-top HOAs and zoning to arrange such a situation.
Eh, I imagine this matters a lot more at the lower income levels, due to marginal utility.
If you're living in a trailer park because that's all you can afford, if you treble your income there's a good chance you'd move out right away.
On the other hand, if you own two $150,000 Lamborghinis and a guy moves in next door with only a single $100,000 Ferrari, are you going to be moving out because the neighbourhood is going down hill? Probably not.
If you're living in a trailer park because that's all you can afford, if you treble your income there's a good chance you'd move out right away.
On the other hand, if you own two $150,000 Lamborghinis and a guy moves in next door with only a single $100,000 Ferrari, are you going to be moving out because the neighbourhood is going down hill? Probably not.
Anybody who buys in an "affordable" neighborhood - at least in CA - is making a lot more than their neighbors who've lived there for decades. If you're polite, you don't flaunt it.
I think "Diverse" is beginning to be the most over used and applied word of all time.
Financial Different-ness? Financial Disparity? I just needed a word to talk about things that were not uniform or the same.
Also not saying that diversity in this case is a good thing or a bad thing - just that it exists and it may have interesting consequences or change with this policy. I would think making salaries public might limit gentrification. But it might also cause flight and impact the tax base. I do not think neighborhoods need to be uniformly financially diverse...
Also not saying that diversity in this case is a good thing or a bad thing - just that it exists and it may have interesting consequences or change with this policy. I would think making salaries public might limit gentrification. But it might also cause flight and impact the tax base. I do not think neighborhoods need to be uniformly financially diverse...
You mean that workers know incomes of other workers in the same company and role and thus there is no way to negotiate wages with people individually basically linking them to their negotiation skills?
some countries have a social "fabric" .. the USA is a geographic location with English-style law, and a lot of people who are very divided and increasingly antagonistic.. Try to build the Roman Empire, and you get Roman Empire problems in your population..
While the U.S. certainly has regional, class, and other subcultures, there is very clearly a national culture and "social fabric".
The easiest way to see this, if you grew up in the U.S. and have not traveled much, is to read tourist guides for your own country.
The easiest way to see this, if you grew up in the U.S. and have not traveled much, is to read tourist guides for your own country.
Is this really the case? Imagine you're at a masquerade ball with 25 people from random countries around the western world, 5 of whom are Americans from various states. Everyone speaks perfect, mechanical, unaccented English, and you are not permitted to discuss dead-giveaway topics like geography, political parties/candidates, specific foods, etc. How confident are you that you could pick out the Americans?
IMHO there is a common theme in the philosophy of life of most Americans. For example, many people have remarked on the high levels of optimism found in most Americans. It is one of my favourite American attributes.
> you are not permitted to discuss dead-giveaway topics
You might as well say "can you identify someone's cultural heritage without discussing anything that would allow you to identify their cultural heritage?". This stipulation makes the task definitionally a matter of chance.
You might as well say "can you identify someone's cultural heritage without discussing anything that would allow you to identify their cultural heritage?". This stipulation makes the task definitionally a matter of chance.
How confident are you that you'd pick out the Spaniard? Or Belgian? Or Canadian?
Generally, people overestimate the variation in their own compatriots and underestimate that in foreigners.
Generally, people overestimate the variation in their own compatriots and underestimate that in foreigners.
I have zero confidence I would be able to pick out the Spaniard, Belgian, Canadian or American.
I'm having a hard time matching your generalization with my experience. When I started travelling I was surprised how similar people were regardless of where they were from.
Sure you can dig into political views and find themes but those aren't consistent or pervasive enough to make predictions on an individual basis.
I'm having a hard time matching your generalization with my experience. When I started travelling I was surprised how similar people were regardless of where they were from.
Sure you can dig into political views and find themes but those aren't consistent or pervasive enough to make predictions on an individual basis.
Ah. My comment assumed its parent comment was written by an American. My point was that, if you hailed from an country with a common culture, it would be trivial not pick folks out of a crowd who share your cultural background. I don't think that Americans would not have such an easy time doing this.
> everyone's taxable income is a matter of public record
That's an interesting approach. I have a couple questions out of curiosity.
Does that include their "offshore" income? By that, I mean income earned outside of the country, not necessarily hidden.
Also, what is income? If there is a billionaire investor and he loses $10 million, do you see that as well?
That's an interesting approach. I have a couple questions out of curiosity.
Does that include their "offshore" income? By that, I mean income earned outside of the country, not necessarily hidden.
Also, what is income? If there is a billionaire investor and he loses $10 million, do you see that as well?
Can't answer for Finland, but in Norway:
>Does that include their "offshore" income?
Yes. It counts as taxable income even if you end up paying 0% tax on it (such as via foreign tax credit).
>Also, what is income?
Net realized income. You can't tell the difference between earning $1M, and earning $10M and losing $9M, and earning $10M on paper but only selling $1M.
>Does that include their "offshore" income?
Yes. It counts as taxable income even if you end up paying 0% tax on it (such as via foreign tax credit).
>Also, what is income?
Net realized income. You can't tell the difference between earning $1M, and earning $10M and losing $9M, and earning $10M on paper but only selling $1M.
In the current low interest rate environment, I've heard that it's common for founders like Musk to borrow against their shares instead of selling shares. The difference is that they pay small interest rate but don't pay larger income tax by realizing their income.
Basically, the same thing that their companies used (or maybe still use) for avoiding high tax on repatriation or their non-US earnings.
Edit: Here's a proof but with different incentives (keeping control): https://www.wsj.com/articles/elon-musk-techs-cash-poor-billi...
Basically, the same thing that their companies used (or maybe still use) for avoiding high tax on repatriation or their non-US earnings.
Edit: Here's a proof but with different incentives (keeping control): https://www.wsj.com/articles/elon-musk-techs-cash-poor-billi...
So what would the public record for Musk be? The number reporting usually quotes? Or a much smaller one? (Still large, of course.)
$0 for income tax as his salary is $0 and he funds his lifestyle by borrowing against shares he owns: https://www.wsj.com/articles/elon-musk-techs-cash-poor-billi...
That... Isn't accurate either. :(. He did actually pay some taxes, so income wouldn't be zero.
This whole "loan against debt" story feels off.
This whole "loan against debt" story feels off.
>eliminates information asymmetries between workers and employers in wage bargaining.
WOW! Never heard of this as an argument. I think it is a very good one for working class.
WOW! Never heard of this as an argument. I think it is a very good one for working class.
Yep, I for example learned that my two bosses (CEO and CMO) in our roughly 20 person company took home roughly 100k in salaried income each, out of the 3 million or so turnover.
Company earnings, turnover and profit, are easily found for all Finnish companies as well. It's pretty easy to weed out the companies on an unhealthy base.
I also saw the salaries as a sign that they're in it for the long term as they could've easily taken home more but they also didn't feel the need to 'save' the company money so they had trust in the current market position and I felt comfortable asking for a 25% raise, which I also got.
It's good to know where you stand among your peers and superiors.
Company earnings, turnover and profit, are easily found for all Finnish companies as well. It's pretty easy to weed out the companies on an unhealthy base.
I also saw the salaries as a sign that they're in it for the long term as they could've easily taken home more but they also didn't feel the need to 'save' the company money so they had trust in the current market position and I felt comfortable asking for a 25% raise, which I also got.
It's good to know where you stand among your peers and superiors.
>in our roughly 20 person company took home roughly 100k in salaried income each
And Fresh Grad from US are demanding 200K from FAANG....
I think it will be hard for countries not currently doing it to have this system in place. But we could at least start with price bracket.
The biggest Win for me isn't the peer checking or market rate. It is that we can also stop HR and Recruiting Agency on their constant lying and BS. Constantly have to play games with them.
And Fresh Grad from US are demanding 200K from FAANG....
I think it will be hard for countries not currently doing it to have this system in place. But we could at least start with price bracket.
The biggest Win for me isn't the peer checking or market rate. It is that we can also stop HR and Recruiting Agency on their constant lying and BS. Constantly have to play games with them.
Assuming the parent comment is referring to earnings in Euros rather than USD they're talking about ~250k USD. It doesn't seem at all strange that leadership in a small company is making the same as entry developers at FAANG. For one, small business. Two, the company leadership gets more equity and a more interesting job.
>in Euros rather than USD they're talking about ~250k USD.
Not ~120K USD?
Not ~120K USD?
True, but 120k in Finnland give you probably the same quality of living as 250k in the bay area.
Oops, you're right. I was more confident I knew the exchange rate than I should've been.
I should've clarified that I did indeed mean euros.
The CEO for example owns a very large home in the most affluent part in the city. the CMO drives a new Tesla and has a villa that's about a 30 minute drive away from our capital city.
A 100k salary is not insane here, there are obviously people making more as well. Those are usually startup founders building something on loaned money or celebrities.
Im living in one of the larger cities, it takes me 10 minutes to drive to the city centrum, so it's a pretty decent location. I pay under 700 euros for 65 square meters with our own sauna. I'm roughly spending 25% of my income on rent for two people.
So, the cost of living is obviously a lot lower here, even if our salaried don't look exactly comparable. You can stretch a 1 million turnover to cover for 10 programmers and tech workers easily instead of getting just one senior developer from the Bay Area :)
The CEO for example owns a very large home in the most affluent part in the city. the CMO drives a new Tesla and has a villa that's about a 30 minute drive away from our capital city.
A 100k salary is not insane here, there are obviously people making more as well. Those are usually startup founders building something on loaned money or celebrities.
Im living in one of the larger cities, it takes me 10 minutes to drive to the city centrum, so it's a pretty decent location. I pay under 700 euros for 65 square meters with our own sauna. I'm roughly spending 25% of my income on rent for two people.
So, the cost of living is obviously a lot lower here, even if our salaried don't look exactly comparable. You can stretch a 1 million turnover to cover for 10 programmers and tech workers easily instead of getting just one senior developer from the Bay Area :)
Price transparency is necessary for the proper functioning of any market. Otherwise there is no clean signal of the supply and demand curves.
Lack of price transparency results to inefficient markets, e.g. someone consistently ending up with outsized profits.
Lack of price transparency results to inefficient markets, e.g. someone consistently ending up with outsized profits.
Price transparency makes sense when goods are fungible. Employees are often not fungible.
Why does it not make sense when goods are not fungible? The buyer and seller can ascertain how fungible the good they are interested in exchanging is. If it’s not, then the other prices will not matter as much. But more information is better than less information.
Also, while employees might not be completely fungible (pretty much all are replaceable though on a long enough timeline), the employees are buying money from the employees, and that is fungible.
Also, while employees might not be completely fungible (pretty much all are replaceable though on a long enough timeline), the employees are buying money from the employees, and that is fungible.
What's the value of a 1999 Camaro? How much should that number influence the price of last year's minivan?
Arguing about the relevance of information to a transaction for some good is 1:1 with simply arguing about the transaction price for some good. Just haggle directly instead of in some meta fashion.
Arguing about the relevance of information to a transaction for some good is 1:1 with simply arguing about the transaction price for some good. Just haggle directly instead of in some meta fashion.
How does a person know which fields to pursue if they do not know wages? You have to look at the trends for which each wages are moving, where they are moving, the number of new job seekers in that field, the number exiting that field.
It is much better now with the internet, but it was not long ago that if you did not know some in a specific business, you had no idea what they would be earning. For a kid in a lower income family, they might never know about what to study to get the top incomes.
> What's the value of a 1999 Camaro? How much should that number influence the price of last year's minivan?
Depends if the buyer is trying to decide between buying a 1999 Camaro or last year’s minivan. Just like a high school student might be trying to decide which field to go into.
It is much better now with the internet, but it was not long ago that if you did not know some in a specific business, you had no idea what they would be earning. For a kid in a lower income family, they might never know about what to study to get the top incomes.
> What's the value of a 1999 Camaro? How much should that number influence the price of last year's minivan?
Depends if the buyer is trying to decide between buying a 1999 Camaro or last year’s minivan. Just like a high school student might be trying to decide which field to go into.
Maybe. But imagine
>enables transparency between workers and employers in wage bargaining.
>enables transparency between workers and employers in wage bargaining.
(not OP)
There is good evidence that when wages are public knowledge minorities and women get paid more too...
https://time.com/5353848/salary-pay-transparency-work/
There is good evidence that when wages are public knowledge minorities and women get paid more too...
https://time.com/5353848/salary-pay-transparency-work/
From your own article:
However, there isn’t enough research to definitively link pay transparency to pay equality. At U.S. government agencies, most of which are required to publicly release pay information, women make 81% of what men make, according to the 2017 report from the Institute for Women’s Policy Research. In the private sector, where the majority of companies don’t have pay transparency policies, women earn 79% of what their male counterparts make.
However, there isn’t enough research to definitively link pay transparency to pay equality. At U.S. government agencies, most of which are required to publicly release pay information, women make 81% of what men make, according to the 2017 report from the Institute for Women’s Policy Research. In the private sector, where the majority of companies don’t have pay transparency policies, women earn 79% of what their male counterparts make.
likely everyone else just gets paid less in the interest of fairness.. this already happens at tech companies like stripe. "Oh we dont care how many competing offers you have or how qualified you are. we pay everyone the same in the name of "fairness".
You would like to think so, but if we compare Finnish to American payrolls, you would find instead that instead top management gets less, if anybody. But there is more...
Economic prosperity is always most sensitive to what the bottom quarter gets paid, because they are who are obliged to spend what they get immediately.
The greater general prosperity that results benefits everybody else, in sum, more than the increased minimum wage. This was recently demonstrated in Seattle, in practice.
In short: no, you are 100% wrong. You should consider this good news.
Economic prosperity is always most sensitive to what the bottom quarter gets paid, because they are who are obliged to spend what they get immediately.
The greater general prosperity that results benefits everybody else, in sum, more than the increased minimum wage. This was recently demonstrated in Seattle, in practice.
In short: no, you are 100% wrong. You should consider this good news.
you didn’t actually provide any proof to disprove my claim and then said i was 100% wrong. either way i don’t think we’re aspiring to be finland.
Which part of, "This was recently demonstrated in Seattle, in practice." were you not able to follow?
100% wrong, and evidently you don't consider it good news.
100% wrong, and evidently you don't consider it good news.
just saying that and getting angry doesnt make it true.
urban areas all boomed due to the roaring economy up until covid, especially powered by the large growth in the tech sector there and corporate tax cuts (and seattle's low state tax making it an attractive place to be locate). theres no evidence seattle magically helped everyone by raising minimum wages.
likely seattle did fine despite the minimum wage increase, not because of them. Especially since you have to pay that much to attract workers there anyway because of the insane living costs. Which partially ballooned due to artificial price controls like that. and theres no measuring how many people got their jobs automated away or didnt get hired because of the wage increases.
and seattle has also had an explosion of homelessness and violent crime.
urban areas all boomed due to the roaring economy up until covid, especially powered by the large growth in the tech sector there and corporate tax cuts (and seattle's low state tax making it an attractive place to be locate). theres no evidence seattle magically helped everyone by raising minimum wages.
likely seattle did fine despite the minimum wage increase, not because of them. Especially since you have to pay that much to attract workers there anyway because of the insane living costs. Which partially ballooned due to artificial price controls like that. and theres no measuring how many people got their jobs automated away or didnt get hired because of the wage increases.
and seattle has also had an explosion of homelessness and violent crime.
Perceiving anger where there is none reveals more than you probably intended.
I am in favor of such a system.
I'm not, it's dumb and makes classism which is already a problem in the USA an even bigger problem.
I wholeheartedly agree, and I'd be in favour of such a system here in the UK.
That said, I'm not sure it would work in the US, where individualism has been taken to such extreme lengths - I could imagine it being used as bragging rights, rather than a source of moral embarrassment as it would be in Europe and Scandinavia.
That said, I'm not sure it would work in the US, where individualism has been taken to such extreme lengths - I could imagine it being used as bragging rights, rather than a source of moral embarrassment as it would be in Europe and Scandinavia.
Moral embarrassment of what?
Moral embarassment of earning 5 million while everyone makes 50k. And everyone seeing this and quitting and going to a company where the boss only makes 100k if everyone else makes 50k (for example).
This might be unfathomable to some people and I must admit that having all salaries public is a bit strange to me as well. I don't know if I like it. I also read elsewhere on here that it only reports net income. I wonder how many schemes of making it look like you have less net income than you really do are employed. Sort of like profitable companies making themselvesook like they are loosing money or barely scraping by to avoid taxes.
This might be unfathomable to some people and I must admit that having all salaries public is a bit strange to me as well. I don't know if I like it. I also read elsewhere on here that it only reports net income. I wonder how many schemes of making it look like you have less net income than you really do are employed. Sort of like profitable companies making themselvesook like they are loosing money or barely scraping by to avoid taxes.
makes it know who to rob
Same in Norway, but the result isn't very accurate.
For one, the wealthy don't tend to have any serious income - it's mostly capital gains for one of their holding companies or similar.
Second, those numbers can be seriously "massaged" by having debt - your income will show much lower if you have any significant debt (no mater how low the interest rate is).
For normal / regular people, the public figure gives you a very rough estimate.
Again - the rich and wealthy will almost always show up with income 0, tax 0, assets 0. You don't even need to be filthy rich to get it structured like that.
edit: What it did create, though, was a cottage industry of tax snoopers. Over here, you can see who's been checking you out - and nosy people not wanting to do that, will pay a couple of bucks for some service where others will check out your information.
For one, the wealthy don't tend to have any serious income - it's mostly capital gains for one of their holding companies or similar.
Second, those numbers can be seriously "massaged" by having debt - your income will show much lower if you have any significant debt (no mater how low the interest rate is).
For normal / regular people, the public figure gives you a very rough estimate.
Again - the rich and wealthy will almost always show up with income 0, tax 0, assets 0. You don't even need to be filthy rich to get it structured like that.
edit: What it did create, though, was a cottage industry of tax snoopers. Over here, you can see who's been checking you out - and nosy people not wanting to do that, will pay a couple of bucks for some service where others will check out your information.
I am no expert but how can you reduce your income tax with debt? I thought only companies could include their debts into their global accounting, not individuals.
Interest paid on debt is seen as an expense. In some tax codes (like in SA) expenses like that offset your taxable income as a private entity.
To be fair the lines get blurry because tax codes like to tax individuals differently to business entities. E.g individuals get taxed on mostly gross profit (income) whereas companies get taxed on net profit after expenses.
IMHO the whole thing would probably be filled with less gaps if we just relied on one of the two or unified them.
To be fair the lines get blurry because tax codes like to tax individuals differently to business entities. E.g individuals get taxed on mostly gross profit (income) whereas companies get taxed on net profit after expenses.
IMHO the whole thing would probably be filled with less gaps if we just relied on one of the two or unified them.
One of the primary mechanisms for tax avoidance is taking out loans against appreciated capital assets to avoid realizing capital gains.
What's stopping the average citizen from exploiting this tax avoidance strategy?
For example, every time I try to submit an order to sell stock that results in short-term capital gains, my broker should be asking me whether I want to take out a collateralized loan instead.
If there are loopholes in the tax system, they should be made readily accessible to all.
What's stopping the average citizen from exploiting this tax avoidance strategy?
For example, every time I try to submit an order to sell stock that results in short-term capital gains, my broker should be asking me whether I want to take out a collateralized loan instead.
If there are loopholes in the tax system, they should be made readily accessible to all.
You can:
https://www.schwab.com/pledged-asset-line https://www.wealthfront.com/portfolio-line-of-credit
And HELOCs are essentially the same for people who own a house but not stocks.
https://www.schwab.com/pledged-asset-line https://www.wealthfront.com/portfolio-line-of-credit
And HELOCs are essentially the same for people who own a house but not stocks.
Got it, but why don't brokers more aggressively push this program onto clients? It seems like a win-win.
The debtor avoids the elevated short-term capital gains tax.
The bank gets interest payments on a loan that has an almost 0 default rate due to the loan being fully collateralized.
The debtor avoids the elevated short-term capital gains tax.
The bank gets interest payments on a loan that has an almost 0 default rate due to the loan being fully collateralized.
> It seems like a win-win.
It's not a win-win, there's significant risk.
> fully collateralized
This is not true! The underlying asset fluctuates in value and is open to lowering significantly in value, leaving the bank holding the bag.
It's not a win-win, there's significant risk.
> fully collateralized
This is not true! The underlying asset fluctuates in value and is open to lowering significantly in value, leaving the bank holding the bag.
> leaving the bank holding the bag
You probably underestimate the ability of banks to evaluate risk. Yes, they absolutely could end up underwater on an asset backed loan, but you also shouldn't assume that you can take out $1 in loans on every $1 of stock.
On Schwab's page, they say: "Schwab Bank, in its sole discretion, will determine what collateral is eligible collateral and the loan value of collateral". So, if you have some recently highly-appreciated shares of AMC for example, they might decide they are not eligible collateral, or only offer to lend you $1 for every $5 of stock.
You probably underestimate the ability of banks to evaluate risk. Yes, they absolutely could end up underwater on an asset backed loan, but you also shouldn't assume that you can take out $1 in loans on every $1 of stock.
On Schwab's page, they say: "Schwab Bank, in its sole discretion, will determine what collateral is eligible collateral and the loan value of collateral". So, if you have some recently highly-appreciated shares of AMC for example, they might decide they are not eligible collateral, or only offer to lend you $1 for every $5 of stock.
LOL, yeah the banks have been so great at leverage in the past couple of decades in the USA that they have to get bailed out repeatedly.
Depends on what you spend the money on. If you take the margin and spend it on an asset, then you have the underlying stock as well as the asset to cover calls. Still requires correct thinking but the risk is mostly based on what you do with the loan.
> why don't brokers more aggressively push this program onto clients
They do.
Wealthfront (as just one example) features and advertises this prominently in their app.
It's also very easy to do with Robinhood, simply withdraw cash using your margin. Interest rates are quite low. 2.5% with Robinhood, 3.65% with Wealthfront.
There's a big "Borrow cash" button right when you open the Wealthfront app.
They do.
Wealthfront (as just one example) features and advertises this prominently in their app.
It's also very easy to do with Robinhood, simply withdraw cash using your margin. Interest rates are quite low. 2.5% with Robinhood, 3.65% with Wealthfront.
There's a big "Borrow cash" button right when you open the Wealthfront app.
You're basically describing a margin account. If you have a portfolio on a margin account at the broker, you can just withdraw money from it up to the amount that your margin allows. That automatically starts a loan for that amount, collateralised by your portfolio.
The problem is that this is not nearly the same as selling stock and withdrawing the sales money, because you keep the risk that the stock will go down thus force liquidating your portfolio. You're conflating selling and borrowing, they're not identical except in these very vague tales about the ultra-rich.
The problem is that this is not nearly the same as selling stock and withdrawing the sales money, because you keep the risk that the stock will go down thus force liquidating your portfolio. You're conflating selling and borrowing, they're not identical except in these very vague tales about the ultra-rich.
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"What's stopping the average citizen from exploiting this tax avoidance strategy?"
Probably that the average citizen doesn't have capital gains.
Probably that the average citizen doesn't have capital gains.
Only 55% of Americans own stock: https://news.gallup.com/poll/266807/percentage-americans-own...
most of those will be in retirement plans which I assume aren't taxed?
> which I assume aren't taxed?
It depends on which kind of retirement account. Might be in Roths and Roths-401Ks which are taxed when the money goes in (treated as regular income), or IRAs and regular 401Ks which are taxed as regular income when the money comes out.
It depends on which kind of retirement account. Might be in Roths and Roths-401Ks which are taxed when the money goes in (treated as regular income), or IRAs and regular 401Ks which are taxed as regular income when the money comes out.
But neither Roth nor Traditional 401k/403b/457/IRA are subject to capital gains tax.
Certainly not capital gains of the order of "all the spending money I need, without any worry about repaying it on time even if the asset goes back down in price."
Can you explain how this works, how it avoids tax? Taking a $100 loan still means you’ll need an income of $100 (plus interest) future income and tax paid on this income...
If you’re gonna say “they benefit in the extra capital gains between now and when the loan is repaid” - no, that can’t be it, that’s exactly equivalent to taking a $100 loan and investing in stocks instead (i.e. leverage).
If you’re gonna say “they benefit in the extra capital gains between now and when the loan is repaid” - no, that can’t be it, that’s exactly equivalent to taking a $100 loan and investing in stocks instead (i.e. leverage).
Chances are it doesn't, but the IRS won't go after rich people if they claim they don't have any taxes to pay.
The assumption is that you are using the money for an income generating activity like buying a rental property.
Hm, but income from rental is also taxed, isn't it?
If so, how does it help?
The income from the rental is taxed, but slowly over decades. You don't have to take that entire tax hit in one year.
You can also sell it and take the gains tax free in many cases.
Short of a 1031 exchange, I'm not sure how you would do that.
You can sell a house every 2 years and write off up to $500k in capital gains as long as it’s been your primary residence for 2 of the last 5 years. Doesn’t need to be consecutive.
Sure, but you have to stomach the 6% commission you’re paying to the brokers, which really limits this situation to transitory market conditions instead of a get rich quick strategy.
Also, people buying rental property from cash they earned from wages or selling their business pay tax on the wages/gains and the rental income, not just the latter...
The correct expression to use to refer to such money is “loan”, not “tax evasion”.
1) You purchased $100 of SPY on June 15th, 2020
2) You're buying a house, and you need $100 today.
3) You sell $100 of SPY, and pay short-term capital gains (up to 37%)
OR...
1) You purchased $100 of SPY on June 15th, 2020
2) You're buying a house, and you need $100 today.
3) You take a loan for $100
4) You wait until June 15th, 2021 and then sell $100 of your SPY holdings, paying long-term capital gains (15-20%)
5) You repay the $100 loan
...it doesn't really avoid tax. It's just an alternative way of accessing capital by taking out a loan instead of liquidating assets.
2) You're buying a house, and you need $100 today.
3) You sell $100 of SPY, and pay short-term capital gains (up to 37%)
OR...
1) You purchased $100 of SPY on June 15th, 2020
2) You're buying a house, and you need $100 today.
3) You take a loan for $100
4) You wait until June 15th, 2021 and then sell $100 of your SPY holdings, paying long-term capital gains (15-20%)
5) You repay the $100 loan
...it doesn't really avoid tax. It's just an alternative way of accessing capital by taking out a loan instead of liquidating assets.
But if the asset sale + the debt leaves you at a loss wouldn't you be able to avoid paying the capital gaibs over the asset sale?
The theoretical assumes SPY increased over the time period. If it decreased, you could of course sell it and pay 0% since your investment lost money, short/long-term gains wouldn’t matter because there wouldn’t be any gains.
I might be misunderstanding your question though.
I might be misunderstanding your question though.
Debt is not a loss unless you default on it.
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The above basically arbitrages long-term vs short-term capgains for the price of 1 APY cycle, right? That's ~23% for short in the USA, and up to income-level (37%?) for short-term. Quite a big difference for a 2-5% APY loan that you close after 1 year, and the numbers would seem to scale better the higher you go.
That's not accurate. It has several benefits (like interest payments being deductible expenses) and wealthy people can continuously borrow to pay off other debts as their other assets appreciate. You just need the rate of appreciation of your assets to be higher than the interest rate. For very big loans, it's quite possible.
Finally, it's also possible to roll the gains into a trust and the cost basis is adjusted to zero on death. [0] So yes, it's tax avoidance.
[0]: E.g. this is how it's possible to do that: https://wellergroupllc.com/taxes-resources/tax140-guide-dete...
Finally, it's also possible to roll the gains into a trust and the cost basis is adjusted to zero on death. [0] So yes, it's tax avoidance.
[0]: E.g. this is how it's possible to do that: https://wellergroupllc.com/taxes-resources/tax140-guide-dete...
https://youtu.be/8pBPZMUcsh0
They never sell, they borrow over that invested money and pay 3% (interest) instead of 37% (income tax)
Also available in the UK, Interactive Brokers margin loan. The interest rate is 1-2% p.a.
My Etrade account has that option. But I don't use it because it's risky. If you take out a loan collateralized by a stock, the stock could drop and you'd owe a lot of money.
Selling the stock locks in the gain. Now, if you only need say 1/2 the value as cash and can absorb the risk of the stock going down, then it makes sense. Or if you want to "buy insurance" by taking out an opposite short position, that would also make sense. But that short position will cost you money too.
So it's not as straightforward as "just take out a loan". You need a very good (and expensive) tax accountant to run the numbers and figure out the best strategy for your situation. Most people can't afford that.
Selling the stock locks in the gain. Now, if you only need say 1/2 the value as cash and can absorb the risk of the stock going down, then it makes sense. Or if you want to "buy insurance" by taking out an opposite short position, that would also make sense. But that short position will cost you money too.
So it's not as straightforward as "just take out a loan". You need a very good (and expensive) tax accountant to run the numbers and figure out the best strategy for your situation. Most people can't afford that.
Why isn't there an option to take out a loan where a repayment option is to transfer the capital asset (at whatever the value happens to be at the time of repayment)?
I.e. I don't get why the risky part of this loan can't be mitigated by the bank taking on the risk and managing it separately. Surely, there would be investors willing to back these types of collateralized loans?
I.e. I don't get why the risky part of this loan can't be mitigated by the bank taking on the risk and managing it separately. Surely, there would be investors willing to back these types of collateralized loans?
You'd need a crazy high interest rate to account for market volatility. If the bank could make accurate predictions as to the future value of the stock, they would just invest in the stocks.
Loans against other assets are much less risky, because they are backed by actual things. If the bank screws up in predicting the future value of a house, they can still own the actual house and land if you default. With stocks it would be far more risky because stocks are far more volatile than houses.
Loans against other assets are much less risky, because they are backed by actual things. If the bank screws up in predicting the future value of a house, they can still own the actual house and land if you default. With stocks it would be far more risky because stocks are far more volatile than houses.
Hm, is it possible to define a range for "crazy high interest"? As the debtor, I'd be willing to pay up to the difference in long-term and short-term capital gains (~15%). I guess where I'm going with this is: I don't understand why the average person ever pays short-term capital gains tax.
> I don't understand why the average person ever pays short-term capital gains tax.
Because the risk of holding the stock is more than the difference in short vs long term capital gains.
If the stock is worth $1000 in gains, I know I can sell it and lock in the gains today and pay my normal income rate. If I have to hold it for another 6 months, there is a huge risk that it drops more than the 5-10% difference in the tax rate for the average person.
Because the risk of holding the stock is more than the difference in short vs long term capital gains.
If the stock is worth $1000 in gains, I know I can sell it and lock in the gains today and pay my normal income rate. If I have to hold it for another 6 months, there is a huge risk that it drops more than the 5-10% difference in the tax rate for the average person.
I pay STCG on option contracts written and on (profitable) short sales (where the holding period is defined to be short-term).
Other positions have a defined thesis and, if that thesis gets invalidated, I close out the position sometimes at a gain. I do try to make most of my gains be LTCG, but trying too hard to optimize capital gains rates can lead to poorer investment decision-making/asset allocation.
Other positions have a defined thesis and, if that thesis gets invalidated, I close out the position sometimes at a gain. I do try to make most of my gains be LTCG, but trying too hard to optimize capital gains rates can lead to poorer investment decision-making/asset allocation.
> ... bank taking on the risk...
Banks don't take on risk. Seriously.
That's another conversation to have, but the simple answer is do you want the value of your checking account impacted by someone else's purchase of Gamestop, or Enron?
And that's why banks don't take risk.
Banks don't take on risk. Seriously.
That's another conversation to have, but the simple answer is do you want the value of your checking account impacted by someone else's purchase of Gamestop, or Enron?
And that's why banks don't take risk.
You can simulate what you want by simultaneously buying an at-the-money protective put and selling an at-the-money covered call. Then regardless of future stock price movement, at expiration (i.e. when the "loan" needs to be repaid) you always transfer the stock away.
Now why don't you plug in this scenario into any Black–Scholes calculator and see how much of a net credit at entry you get (if you even have one). That would be the maximum loan amount you'd be able to get under this scheme. If you could get one at all, the loan amount is tiny compared to the value of the asset.
Now why don't you plug in this scenario into any Black–Scholes calculator and see how much of a net credit at entry you get (if you even have one). That would be the maximum loan amount you'd be able to get under this scheme. If you could get one at all, the loan amount is tiny compared to the value of the asset.
Taking the short position on a stock you own is called selling short against the box. I don't know much about it, just had heard of it, but it sounds like it's been regulated in the US (to reduce its use for tax avoidance) since 1997.
https://www.investopedia.com/terms/s/sellagainstthebox.asp
https://www.investopedia.com/terms/s/sellagainstthebox.asp
If one’s broker had collateralized loans in their menu of options, what volume of gains are needed to overcome the initial setup costs of the loan?
The average citizen can't borrow to pay off debts indefinitely.
At ~2% interest the billionaire can borrow against their assets and keep borrowing to pay off interest. The assets gain in value at 4-6% per year so they are actually coming out ahead and paying 0% tax.
Even a middle class retiree typically needs to draw down their savings to pay expenses. Giving up 2% to avoid taxes wouldn't be viable. The bank would also observe that there is a higher risk that the retiree goes bust than a billionaire and not lend enough money for the scheme to be worthwhile.
At ~2% interest the billionaire can borrow against their assets and keep borrowing to pay off interest. The assets gain in value at 4-6% per year so they are actually coming out ahead and paying 0% tax.
Even a middle class retiree typically needs to draw down their savings to pay expenses. Giving up 2% to avoid taxes wouldn't be viable. The bank would also observe that there is a higher risk that the retiree goes bust than a billionaire and not lend enough money for the scheme to be worthwhile.
or even at all! large amount of Americans don't even have access to banking.
The loans they can get are insanely (i think disgustingly) predatory.
payday loans with fees can ed up being like 664% APR!!!!! Your 500 loan becomes 2000 you have to pay back in a couple months, which you obviously can't..
https://www.cnbc.com/2021/02/16/map-shows-typical-payday-loa...
The loans they can get are insanely (i think disgustingly) predatory.
payday loans with fees can ed up being like 664% APR!!!!! Your 500 loan becomes 2000 you have to pay back in a couple months, which you obviously can't..
https://www.cnbc.com/2021/02/16/map-shows-typical-payday-loa...
Right it's crucially important we leapfrog all this crypto and fintech nonsense by just doing "fed accounts for all" administered electronically and at the post office.
Boring commercial banking should be utility, and any private sector offering will have to compete with a new non-grifter baseline.
Boring commercial banking should be utility, and any private sector offering will have to compete with a new non-grifter baseline.
And 2% is really high. Billionaires are likely getting less than 1% interest rates. Big banks are willing to lose money even, just to court these billionaires.
Um, at various times I have had a home equity loan...
Your example of loans is tax deferral, not avoidance. As for your examples in general, those are really good.
Collateralized loans on stock we usually call "margin loans" and are easy to get.
Also, anyone in real estate will recognize the term "HELOC", where you can get a loan against the value of your home, presumably after its value has appreciated.
I think both of those are fairly accessible, at least in the US.
Collateralized loans on stock we usually call "margin loans" and are easy to get.
Also, anyone in real estate will recognize the term "HELOC", where you can get a loan against the value of your home, presumably after its value has appreciated.
I think both of those are fairly accessible, at least in the US.
For the mega-rich it's tax avoidance. That money gets rolled into the estate or trust with the cost-basis resetting on death.
That's not a tax loophole though. You still have to pay back the loan with interest. And it has to be paid with cash from somewhere. People like Bezos do this primarily to retain their equity because it's worth more than money to them. It's their ownership stake. For others, they are just betting the assets will appreciate more than the cost of the interest. It's income optimization not tax avoidance.
You can do the same thing with a HELOC. Otherwise you'd have to sell your house and pay cap gains then spend the net profit. I don't think a HELOC is tax dodge.
You can do the same thing with a HELOC. Otherwise you'd have to sell your house and pay cap gains then spend the net profit. I don't think a HELOC is tax dodge.
HELOC definitely isn't a tax dodge because the first $250k-$500k of profit on the sale of your home is not taxable anyway.
But there is something to be said about being able to defer taxes effectively forever. Only the ultra-wealthy are able to do this.
But there is something to be said about being able to defer taxes effectively forever. Only the ultra-wealthy are able to do this.
This doesn't defer taxes, it defers realizing profits. The loan payments have to be made with cash that came from some source which can likely be taxed. Anyone with assets can do this proportional to their assets. Admittedly most people don't have sufficient assets to make it worthwhile. Nor do they exercise the voting rights on stocks. But really any middle class investor with a nest egg could do it.
> What's stopping the average citizen from exploiting this tax avoidance strategy?
If your stocks go down, you still owe the full amount of the loan. If your stocks go to zero, you still owe the full amount of the loan.
If your stocks go down, you still owe the full amount of the loan. If your stocks go to zero, you still owe the full amount of the loan.
I've been saying this for years. Low interest rates are like a triple handout to the extremely wealthy.
1) pump up asset prices.
2) lower the rate at which you can borrow against unrealized gains to make avoiding taxes more attractive.
3) people use this savings to buy more assets. Repeat step 1. Virtuous cycle.
I can't go to a bank and get a loan against $1M in my 401k at 2% interest. But I know people with $50M+ that are doing this. It's absurd.
1) pump up asset prices.
2) lower the rate at which you can borrow against unrealized gains to make avoiding taxes more attractive.
3) people use this savings to buy more assets. Repeat step 1. Virtuous cycle.
I can't go to a bank and get a loan against $1M in my 401k at 2% interest. But I know people with $50M+ that are doing this. It's absurd.
The conflation of change in mark-to-market net worth with income has got a whole lot to do with the constant breathless reporting of "Bezos/Gates/Buffet/... made/lost x BILLION dollars today" every time the market moves by more than a point.
Sure, I get they want to beat the drum on wealth inequality, and perhaps that's a drum worth beating. But its a disingenuous disservice to pretend that these people are sitting on a massive pile of 'hoarded' liquid cash that could be redistributed in a meaningful without incurring massive losses. Might as well pretend that we could seize and sell all of the latest $100bn shitcoin and get $100bn USD to distribute.
Sure, I get they want to beat the drum on wealth inequality, and perhaps that's a drum worth beating. But its a disingenuous disservice to pretend that these people are sitting on a massive pile of 'hoarded' liquid cash that could be redistributed in a meaningful without incurring massive losses. Might as well pretend that we could seize and sell all of the latest $100bn shitcoin and get $100bn USD to distribute.
If they didn't want to incur loss Bezos could just gift me his shares in Amazon
Yes, it's a bummer common discourse does this. While making the billionaires wealth seem more liquid would seem to overstate their power, I think the real issue is quite opposite.
The popular understanding of capitalism is accurate prices and liquid goods, and only a few things (as contested in culture wars) are genuine separate axis. The reality is the real power of the billionaires isn't in their "net worth" (however good the accounting is), but in their power over the institutions they control. Look at the size of the flow in and out of those institutions, their capacity for investment. Realize also that even as we collectively have the wealth for much simultaneous investment, earlier investment has a profound and non-erotic effect on future history (e.g. car vs public transit, Unix being entrenched for 50+ years, etc.) This is the real travesty of billionaire power, not the ability of Bezos to buy big yachts or whatever.
The popular understanding of capitalism is accurate prices and liquid goods, and only a few things (as contested in culture wars) are genuine separate axis. The reality is the real power of the billionaires isn't in their "net worth" (however good the accounting is), but in their power over the institutions they control. Look at the size of the flow in and out of those institutions, their capacity for investment. Realize also that even as we collectively have the wealth for much simultaneous investment, earlier investment has a profound and non-erotic effect on future history (e.g. car vs public transit, Unix being entrenched for 50+ years, etc.) This is the real travesty of billionaire power, not the ability of Bezos to buy big yachts or whatever.
Yes. Most people dont think about it that way. I am wondering if there are any simple free bitcoin / cryptocurrency making services? Get people to apply one crypto of their own, make 1 billion coins. I buy one for one coin for $1. Now that person is instantly a billionaire.
I never followed this chain of logic. The whole point behind the stock market is to treat any commonly traded stock as a liquid asset. Why do you think that this fails with respect to Bezos and Gates?
Bill Gates started selling off his microsoft stake in the late 90s. It took him more than two decades to get from 49% ownership down to the 1.9% he has today. It's hard for figure heads to divest without crashing the stock because it carries substantial signal risk.
The stock market is only liquid at smaller scales, bigger transactions will have dramatic effects on the price.
The stock market is only liquid at smaller scales, bigger transactions will have dramatic effects on the price.
You're assuming Gates was trying to divest from MSFT. There's no evidence he was in a hurry.
You are right that insiders selling can be a signal. That's why we have laws that govern their actions. But that's because it is assumed Gates knows more than the average MSFT investor.
Yes, if Bezos woke up tomorrow and wanted to crash AMZN by selling his shares, he could. But he routinely liquidates over a billion dollars worth a quarter.
You are right that insiders selling can be a signal. That's why we have laws that govern their actions. But that's because it is assumed Gates knows more than the average MSFT investor.
Yes, if Bezos woke up tomorrow and wanted to crash AMZN by selling his shares, he could. But he routinely liquidates over a billion dollars worth a quarter.
No assumptions are needed. He created a public divestment plan and sold 20 million shares per quarter since. While it’s normal for insiders to declare trades well in advance doing so decades prior is a bit notable. He was pretty upfront about wanting to diversify after Ballmer took over.
Sorry, yes he wanted to diversify as he was no longer in charge. I meant to write something about assuming he cared about diversifying quickly (lost faith in MSFT) as opposed to so he could reduce his risk and think less about his asset distribution.
By definition a stock is not a liquid asset.
It needs to be sold first. In order to be sold, you need a buyer. You don't always have a buyer.
The stock market converts stock into a (more) liquid asset. The value of GOOG may vary day to day, but no one thinks that it's difficult to turn shares into cash.
Turning oodles of shares into cash at the prevailing price, without pushing the price adversely, is quite a trick. "Slippage" is how to research this concept.
Who suddenly needs $3 billion out of the blue? Because Bezos regularly cashes in over a billion each quarter. Is that not enough to maintain a lifestyle?
But if he wants to buy a sports team, he can probably pay directly in AMZN stock as a private transaction (well, except for possible SEC regulations.)
But if he wants to buy a sports team, he can probably pay directly in AMZN stock as a private transaction (well, except for possible SEC regulations.)
> By definition a stock is not a liquid asset.
"By definition"? Which definition are you using?
Liquidity exists on a spectrum and is not binary:
> In business, economics or investment, market liquidity is a market's feature whereby an individual or firm can quickly purchase or sell an asset without causing a drastic change in the asset's price. Liquidity involves the trade-off between the price at which an asset can be sold, and how quickly it can be sold. In a liquid market, the trade-off is mild: one can sell quickly without having to accept a significantly lower price. In a relatively illiquid market, an asset must be discounted in order to sell quickly.[1][2]
* https://en.wikipedia.org/wiki/Market_liquidity
"By definition"? Which definition are you using?
Liquidity exists on a spectrum and is not binary:
> In business, economics or investment, market liquidity is a market's feature whereby an individual or firm can quickly purchase or sell an asset without causing a drastic change in the asset's price. Liquidity involves the trade-off between the price at which an asset can be sold, and how quickly it can be sold. In a liquid market, the trade-off is mild: one can sell quickly without having to accept a significantly lower price. In a relatively illiquid market, an asset must be discounted in order to sell quickly.[1][2]
* https://en.wikipedia.org/wiki/Market_liquidity
And yet I had to pay tax for exercising stock options from a startup I left, stocks I was never allowed to sell since the company was private.
Everything is different when you start dealing with billions vs a few dollars. If Gates decided to liquidate his stock and use the money to buy real estate in Seattle he would decimate the stock, wreck the housing market, and get sued by shareholders. You can't just move money around and have actual goods and services appear out of thin air. That's why it's dumb when people say things like: "Those fighter jets costs 50,000 college educations".
I think the market is more to treat the stake in a company as a liquid asset. Such that you can transfer stake to someone else for an agreed value.
But, it is not the value that is liquid, necessarily. It is just the stake. In theory, there is intrinsic value to this. In practice? Much more complicated.
But, it is not the value that is liquid, necessarily. It is just the stake. In theory, there is intrinsic value to this. In practice? Much more complicated.
one way to put it, if amazon stock lost 98% of its value, Bezos would still have over 1 billion dollars worth of it.
The day to day fluctuations may be relatively meaningless, but the amount of wealth controlled via it is very real.
The day to day fluctuations may be relatively meaningless, but the amount of wealth controlled via it is very real.
Lol if i have a paint which value fluctuate every year i should pay taxes or receive credits according to this article.. same for car , house.. incredibly ingenuous article ... Why stop here.. My qi could have a potential value if i do a test and get a high score i should pay taxes ? Stocks or growing company shares should not pay taxes until you sold them because you didn't benefit from those until you sell them, if you decide to give your shares to your employees when you die.. and you die poor because your annual income was low and you never sold more shares than you needed why you should pay billion in taxes if the company is worth billions (or was worth billions at certain point in time ) ? This kind of tax system proposed may cause company fail because shares owners may be forced to sell shares to pay taxes on shares just because those.. shares exists .. absurd.. when the company pay taxes and you pay taxes on what you take and also pay vat and other taxes on what you spend ? Very ingenuous article imo taxes should not be avoided and should be equal, but should be on money you receive it spend not on some assets that grown in value ( btw note that indeed something like houses and cars often have some kind of taxes already recalculated on current value ) but this is a different type of tax based on usage and owning something that require maintenance (ie: city, roads,...)
But why limit at public companies if i have a company which is losing money and have 10k shares and i sell one share to you at 1k because you believe in it , this same year i should pay money on 10mil$ because iphotetical value of the company based on recent sale was 10mil ? And my net worth is now 10mil?
I will go further..let me be hypothetical.. in a closed and transparent system imho even income should not be taxed.. only spending.. if i earn 10bil and spend 0 why should I pay ? If i donate those 10b to my children and he spend 0 and grow it to 100b or leave it in bank.. all spending 0 .. what is the difference of taxation here ? We both died homeless and hungry... We are doing the equivalent of buyback\ reverse printing on dollars...decreasing liquidity ....Until i spend what is the problem ?.. btw this is not a closed and transparent system so taxing liquid assets is ok.. it's when I spend that I'm going to use or abuse the system or the ecosystem depending on what I'm buying . So let me pay 9000% taxes on a dodo steak and 1% on tofu burger this way with ethic taxing policies i would be also incentivated to spend better and improve the world ..
The people who will be most upset about this probably aren't the wealthy people themselves, but their lawyers and accountants.
I have a lawyer friend who does estates for ultra-wealthy people. Each week, her whole firm gets together to review all new laws that have been passed that might change estates, and one of them does a "book report" on how to take advantage of old laws. They consider this their competitive advantage and how they win clients over other firms -- by being better at taking advantages of loopholes.
I'm sure they'll be looking at this article to both gain ideas and check if any of their own clients are there and if any of their secrets are revealed.
I have a lawyer friend who does estates for ultra-wealthy people. Each week, her whole firm gets together to review all new laws that have been passed that might change estates, and one of them does a "book report" on how to take advantage of old laws. They consider this their competitive advantage and how they win clients over other firms -- by being better at taking advantages of loopholes.
I'm sure they'll be looking at this article to both gain ideas and check if any of their own clients are there and if any of their secrets are revealed.
Interesting, but Pro Publica’s calculation of effective tax rate as taxes payed divided by wealth increase is weird. I don’t think there’s a jurisdiction in the world that calculates tax that way, and there are good reasons for that.
The exact point is that because taxation does not consider this income, the vast majority of the money made by very rich people takes this form. Pro Publica's point is not that these people are breaking the law, but that the tax system should be different.
That's not how you would want to implement the tax law, but it reflects the moral intuition.
ProPublica confuses wealth with income.
If you have $2b in wealth, and lost $1b in bad investments one year, you're still a billionaire, and your tax rate is 0%.
If you have $2b in wealth, and lost $1b in bad investments one year, you're still a billionaire, and your tax rate is 0%.
Nope. $3000 yearly passive loss exemption.
Let's say you operate a business netting you $1B and then buy a $1B pokemon card, which you sell for $0. You owe tax on $1B - $3000.
Let's say you operate a business netting you $1B and then buy a $1B pokemon card, which you sell for $0. You owe tax on $1B - $3000.
If you have $2b in wealth, and lose $1b of it, you do not owe taxes on $1b.
At some point they may have paid taxes on that $2B asset distribution, but of course they still have it, so maybe they took out a $1B loan to pay the IRS. Now they sell the asset, and they are lucky that it fetches $1B, enough to pay the loan. Now they have $0, and a huge sigh of relief. Could have been much worse.
So you see, a lot of these equity-based billionaires would owe more than they have without these 'loopholes', and some obviously not much with them.
So you see, a lot of these equity-based billionaires would owe more than they have without these 'loopholes', and some obviously not much with them.
It's not a "loophole" to not owe taxes on lost money.
Sorry; I'm not making myself clear. The current tax law makes it very possible to pay taxes on lost money. My perspective is that this is horrible policy.
A simple example is an equity distribution that sells for less than taxes owed on it. The distribution is taxed at last trade price, and the loss in the sale is limited to $3000 annually.
Many people do not realize how disastrous it can be to assess tax on anything that isn't legal tender, and this article seems to be promoting that.
A simple example is an equity distribution that sells for less than taxes owed on it. The distribution is taxed at last trade price, and the loss in the sale is limited to $3000 annually.
Many people do not realize how disastrous it can be to assess tax on anything that isn't legal tender, and this article seems to be promoting that.
Let's say you borrow and invest $1 million into a business startup, like buying farmland. The land goes up in value 10%. Now you owe $40,000 in taxes. But you only made a $50,000 profit farming it.
How are you going to pay taxes on that "gain"? You already borrowed money to pay for the farmland, you can't borrow any more.
The only way is by selling off parts of the farm, which may not be feasible.
In other words, many enterprises will never start because it is an impossible business model.
You'll just wind up crushing existing businesses and make starting new ones infeasible.
How are you going to pay taxes on that "gain"? You already borrowed money to pay for the farmland, you can't borrow any more.
The only way is by selling off parts of the farm, which may not be feasible.
In other words, many enterprises will never start because it is an impossible business model.
You'll just wind up crushing existing businesses and make starting new ones infeasible.
That logic doesn't really apply when you scale up to the ultra-billionaires. Shares of stock are plenty liquid.
The rest of it still applies. It makes the numbers not work for starting a business. Besides, selling off pieces of it means making less and less money off of it. You wind up working for the people you sold it to in order to pay the taxes.
You might as well kiss entrepreneurship goodbye with wealth taxes.
You might as well kiss entrepreneurship goodbye with wealth taxes.
There is such a stupidly easy solution to this, which is to set a lower limit for whatever rule applies.
Though... even though things like estate taxes have these rules (either "first million isn't taxed" or "primary residence isn't taxed" etc, depending on jursidiction), most people tend to not actually read the details and assume that the gov't wants to take the family farm.
No, I don't think it's your god-given right to hand down a $2 million townhouse without paying taxes.
Though... even though things like estate taxes have these rules (either "first million isn't taxed" or "primary residence isn't taxed" etc, depending on jursidiction), most people tend to not actually read the details and assume that the gov't wants to take the family farm.
No, I don't think it's your god-given right to hand down a $2 million townhouse without paying taxes.
You don't have the god-given right to take it, either :-)
Taxes should be extracted as needed to support things that only government can do. Taxes should not be extracted based on envy, or just because they can be.
Taxes should be extracted as needed to support things that only government can do. Taxes should not be extracted based on envy, or just because they can be.
Taxes are a tool in the toolbox to organizing society for progress as a whole.
I think that making it so that people who have a lot of accumulated wealth are asked to put more into the collective coffers is an extremely obvious and fair-ish way of doing things. Much more so than dumb things like "roads should be paid for by gas taxes" (we don't pay for libraries with book taxes! Or schools with child labor income tax!)
I think that making it so that people who have a lot of accumulated wealth are asked to put more into the collective coffers is an extremely obvious and fair-ish way of doing things. Much more so than dumb things like "roads should be paid for by gas taxes" (we don't pay for libraries with book taxes! Or schools with child labor income tax!)
Unless the float is much smaller than the cap.
I would really just like a flat tax. No loopholes or deductions. Very simple. It should not take a masters degree to understand the tax code.
I recognize this is one of the main ways Policy is implemented (incentives can drive certain behavior), but we’ve got hundreds of years of complexity going on and I wouldn’t mind simplifying this.
I don’t know where to start though.
I recognize this is one of the main ways Policy is implemented (incentives can drive certain behavior), but we’ve got hundreds of years of complexity going on and I wouldn’t mind simplifying this.
I don’t know where to start though.
> I don’t know where to start though.
I would start with "cui bono" and look into learning about the various institutions in place who's main purpose is to maintain the complexity, that would stand to make significant losses (or disappear) if it were simplified.
(just in case this sounds like pessimism or apathy, I don't necessarily think it is. But if one genuinely wants change, one does need to be aware of where hurdles lie)
I would start with "cui bono" and look into learning about the various institutions in place who's main purpose is to maintain the complexity, that would stand to make significant losses (or disappear) if it were simplified.
(just in case this sounds like pessimism or apathy, I don't necessarily think it is. But if one genuinely wants change, one does need to be aware of where hurdles lie)
Unfortunately Intuit (Turbotax) and the CPA trade groups lobby against any tax simplification whenever it comes up. Regulatory capture of our political process has corrupted it at every turn.
Flat tax is too regressive. What seems justified is a basic S-curve indexed by income, and where the left hand side dips below zero so those below a certain line effectively get a negative income tax to maintain a certain standard of living.
Agreed. Flat tax and sales tax are both regressive and both hurt the population the economy needs most to spend on consumption to be viable with circulation.
Flat tax + minimum non-taxable incomes is where it's at. Just set high enough threshold.
Many of the ultra-wealthy have little or no income.
What needs to be taxed is wealth, not income.
What needs to be taxed is wealth, not income.
I disagree, at least not with so simple an implementation. I don't want to live in a world where we're unable to escape working by constant taxes. There should be at least a minimum threshold where wealth is completely untaxed so that people can live freely and not have to work until they die. Enough for a house, some property and land, and a retirement fund. I'd consider it more justifiable to tax someone like Bill Gates with billions of dollars and millions of acres of land, but it's just unnecessary for taxes to be absolutely inescapable.
Isn't the problem though that any time you introduce a threshold the threshold gets gamed?
A tax on people making $400k a year causes a giant spike in people making $399k a year.
I think no matter what you do, bad unintended consequences will occur.
A tax on people making $400k a year causes a giant spike in people making $399k a year.
I think no matter what you do, bad unintended consequences will occur.
> I think no matter what you do, bad unintended consequences will occur.
I agree, and that's why I don't freak out when we have inequality. It's unavoidable for as long as we allow humans to grow based on genetic lottery rather than pre-approved personalities. No matter what system you have, if I'm smart and selfish enough, I'll find a way to exploit it for my benefit at least, and maybe go out of my way to harm others if I'm sadistic, too.
I agree, and that's why I don't freak out when we have inequality. It's unavoidable for as long as we allow humans to grow based on genetic lottery rather than pre-approved personalities. No matter what system you have, if I'm smart and selfish enough, I'll find a way to exploit it for my benefit at least, and maybe go out of my way to harm others if I'm sadistic, too.
Won’t that just increase prices of the things you’ve mentioned?
I feel we should somehow work to become more distributed instead of forcing people to come to large cities because all the opportunity is there
I feel we should somehow work to become more distributed instead of forcing people to come to large cities because all the opportunity is there
I think the main problem is we think that power laws are not natural and that nature distributes everything on a normal distribution.
That is true for the height of humans. Most other things with humans, not so much.
That is true for the height of humans. Most other things with humans, not so much.
"I don't want to live in a world where we're unable to escape working by constant taxes."
I am against a system in which some escape work while others do not.
I am against a system in which some escape work while others do not.
What incentive would I have in your system to be a frugal hard worker that practices delayed gratification instead of a dopamine-addicted wasteful lazy consumer?
What incentive do I have in not-that-system to be a cooperative, generous hard worker that practices collectivism instead of a power-addicted exploitative ambitious business magnate?
^- is another awfully slanted question.
^- is another awfully slanted question.
> collectivism
Collectivism is overrated and unnecessary. I'm a misanthrope and I don't want to live in a collective society, I want to live in a society where I can get away from other humans and keep to myself. Taxes and laws are enough to keep society civil and functional; going beyond that is imposing your own personal beliefs on everyone else, like a theocracy or dictatorship.
Collectivism is overrated and unnecessary. I'm a misanthrope and I don't want to live in a collective society, I want to live in a society where I can get away from other humans and keep to myself. Taxes and laws are enough to keep society civil and functional; going beyond that is imposing your own personal beliefs on everyone else, like a theocracy or dictatorship.
> Collectivism is overrated and unnecessary.
This is a pretty hilarious take IMO. Cooperation is literally the only reason humans are the dominant species on the planet. But sure, "overrated and unnecessary".
This is a pretty hilarious take IMO. Cooperation is literally the only reason humans are the dominant species on the planet. But sure, "overrated and unnecessary".
There's a difference between collectivism and cooperation. I contrast collectivism with individualism; i.e. valuing the collective over the individual vs valuing the individual over the collective. I want to live in an individualist society, not a collectivist one.
You either missed my point or you are making my point.
It is hard to tell!
It is hard to tell!
This comment perfectly encapsulates the political/societal leanings I completely disagree with. This sentiment of "nobody can have anything nice unless there's enough for absolutely everyone to have an equal amount."
Life's not fair, and no amount of politics or regulations will change that. There will always be some people with better health, more attractiveness, more intelligence, more charisma, better connections, more drive, better self-control, and so on. I have excellent physical and mental health despite hardly ever going to a doctor in my life; I have good genes and I have a natural interest in eating healthy and exercising. Some people are born into rich families and will never have to work a day in their life if they don't want to. Some people are beautiful and go about their life just shy of being worshipped because of their looks. That's life.
I have zero problem with a world in which some people have a way better life than everyone else. My goal is to avoid bringing anybody down while bringing as many people as possible up. Let the rich guy be rich, and find a way to help the poor guy educate himself and get more opportunities. Let the beautiful people be beautiful, and help everyone else take care of themselves better and learn to make the most of what they have. It's anti-freedom and dictatorial to force everybody to wage slavery just because some people are born poor or are careless about their finances.
Life's not fair, and no amount of politics or regulations will change that. There will always be some people with better health, more attractiveness, more intelligence, more charisma, better connections, more drive, better self-control, and so on. I have excellent physical and mental health despite hardly ever going to a doctor in my life; I have good genes and I have a natural interest in eating healthy and exercising. Some people are born into rich families and will never have to work a day in their life if they don't want to. Some people are beautiful and go about their life just shy of being worshipped because of their looks. That's life.
I have zero problem with a world in which some people have a way better life than everyone else. My goal is to avoid bringing anybody down while bringing as many people as possible up. Let the rich guy be rich, and find a way to help the poor guy educate himself and get more opportunities. Let the beautiful people be beautiful, and help everyone else take care of themselves better and learn to make the most of what they have. It's anti-freedom and dictatorial to force everybody to wage slavery just because some people are born poor or are careless about their finances.
> This comment perfectly encapsulates the political/societal leanings I completely disagree with. This sentiment of "nobody can have anything nice unless there's enough for absolutely everyone to have an equal amount."
That's not what the OP said. They said that they're against a system that permits some to escape work while others never can. In other words, some people can comfortably retire when they're old, and some are basically forced to work until the day they die, and some never have to work at all. That's not at all the same as saying that everyone should have equal outcomes at all levels of the game, so much as saying that everyone should eventually be able to cross the same finish line.
> It's anti-freedom and dictatorial to force everybody to wage slavery just because some people are born poor or are careless about their finances.
What you're failing to recognize is that wealth disparities are artificially created by government policies. The government isn't going around dictating to people what is or is not beautiful, or dictating what you must eat so you will be healthy, or what you must wear to be fashionable, but they are dictating what every person must pay into the system to keep it running.
It turns out, the people who are benefitting the most from the system are not paying into that system. If you're really interested in spreading freedom, then perhaps you should be more invested in the 99.9% whose financial freedoms are being curtailed in order to prop up that remaining 0.01%.
That's not what the OP said. They said that they're against a system that permits some to escape work while others never can. In other words, some people can comfortably retire when they're old, and some are basically forced to work until the day they die, and some never have to work at all. That's not at all the same as saying that everyone should have equal outcomes at all levels of the game, so much as saying that everyone should eventually be able to cross the same finish line.
> It's anti-freedom and dictatorial to force everybody to wage slavery just because some people are born poor or are careless about their finances.
What you're failing to recognize is that wealth disparities are artificially created by government policies. The government isn't going around dictating to people what is or is not beautiful, or dictating what you must eat so you will be healthy, or what you must wear to be fashionable, but they are dictating what every person must pay into the system to keep it running.
It turns out, the people who are benefitting the most from the system are not paying into that system. If you're really interested in spreading freedom, then perhaps you should be more invested in the 99.9% whose financial freedoms are being curtailed in order to prop up that remaining 0.01%.
> In other words, some people can comfortably retire when they're old, and some are basically forced to work until the day they die, and some never have to work at all. That's not at all the same as saying that everyone should have equal outcomes at all levels of the game, so much as saying that everyone should eventually be able to cross the same finish line.
That's exactly what I was referring to. Unless everybody can retire, nobody can retire. No thanks. I will do whatever it takes to keep the US from becoming that kind of a dystopia.
> What you're failing to recognize is that wealth disparities are artificially created by government policies.
I don't hold that belief. Disparities and inequality are fundamental to human life, which is why I gave the example of attractiveness, health, etc. I also mentioned careless people because you'll always have people who are self-destructive or unable to support themselves, and you can't help every single person. I'm not bothered by that, I accept it as reality. Thus I think it's utopian to believe it's possible to live fully equally, and it only keeps anybody from having nice things just because there's not enough for everyone.
That's exactly what I was referring to. Unless everybody can retire, nobody can retire. No thanks. I will do whatever it takes to keep the US from becoming that kind of a dystopia.
> What you're failing to recognize is that wealth disparities are artificially created by government policies.
I don't hold that belief. Disparities and inequality are fundamental to human life, which is why I gave the example of attractiveness, health, etc. I also mentioned careless people because you'll always have people who are self-destructive or unable to support themselves, and you can't help every single person. I'm not bothered by that, I accept it as reality. Thus I think it's utopian to believe it's possible to live fully equally, and it only keeps anybody from having nice things just because there's not enough for everyone.
> That's exactly what I was referring to. Unless everybody can retire, nobody can retire.
No, it simplifies to "everybody can retire, period".
> I don't hold that belief. Disparities and inequality are fundamental to human life
When someone refers to "wealth inequality", they're not talking about disparities of 1 or two orders of magnitude, they're talking about 5 or 6 orders of magnitude. Show me a disparity in beauty or health of 6 orders of magnitude.
It's pretty clear that these analogies are not remotely faithful to what we're discussing here.
No, it simplifies to "everybody can retire, period".
> I don't hold that belief. Disparities and inequality are fundamental to human life
When someone refers to "wealth inequality", they're not talking about disparities of 1 or two orders of magnitude, they're talking about 5 or 6 orders of magnitude. Show me a disparity in beauty or health of 6 orders of magnitude.
It's pretty clear that these analogies are not remotely faithful to what we're discussing here.
> No, it simplifies to "everybody can retire, period".
Sure, I'd love that too. It's a great goal but not one that I remotely believe is actually achievable. Feel free to come back within the next 50 years and say you told me so if I end up being wrong.
> When someone refers to "wealth inequality", they're not talking about disparities of 1 or two orders of magnitude, they're talking about 5 or 6 orders of magnitude.
This is an unfounded claim. I'd love to see what data you're basing this on.
> Show me a disparity in beauty or health of 6 orders of magnitude.
I can also easily show you disparities of that magnitude: just look at any of the many chronically ill patients that rack up medical expenses throughout their life, versus people who smoke and drink into their 80s and 90s without a problem and never see a doctor. You can easily use total lifetime medical cost as a metric if you want to meet your arbitrary disparity threshold. If you're in the "everyone's beautiful/healthy/smart in their own way" crowd then we have fundamentally different stances and there's little use talking further.
Sure, I'd love that too. It's a great goal but not one that I remotely believe is actually achievable. Feel free to come back within the next 50 years and say you told me so if I end up being wrong.
> When someone refers to "wealth inequality", they're not talking about disparities of 1 or two orders of magnitude, they're talking about 5 or 6 orders of magnitude.
This is an unfounded claim. I'd love to see what data you're basing this on.
> Show me a disparity in beauty or health of 6 orders of magnitude.
I can also easily show you disparities of that magnitude: just look at any of the many chronically ill patients that rack up medical expenses throughout their life, versus people who smoke and drink into their 80s and 90s without a problem and never see a doctor. You can easily use total lifetime medical cost as a metric if you want to meet your arbitrary disparity threshold. If you're in the "everyone's beautiful/healthy/smart in their own way" crowd then we have fundamentally different stances and there's little use talking further.
So no one ever retires?
Most of the wealth tax proposals I've seen don't even kick in until you have tens or hundreds of millions of dollars. I don't think anybody needs to be worried about those people having to work until they die.
The wealth have increased asset value instead of income. If we can capture that, that's probably sufficient.
I don't entirely disagree, but current political and economic structures aren't designed well enough for a wealth tax.
A wealth tax will fail for the same reason the income tax has failed. The extremely wealthy will move their wealth into complex multinational financial vehicles and strut up to the tax authority saying, "See? I own very little." It becomes the legislative cat and mouse game, which governments lose when up against those with massive assets with which to lobby.
There is not a good answer that I have found to the taxation issue. Wealth is self-sustaining over the short term like advantageous mutations are self-sustaining in biological systems.
There is not a good answer that I have found to the taxation issue. Wealth is self-sustaining over the short term like advantageous mutations are self-sustaining in biological systems.
> The extremely wealthy will move their wealth into complex multinational financial vehicles
In Elizabeth Warren's proposal, they would be subject to a 40% exit tax on the wealth that they moved. If they didn't pay the exit tax, that would be fraud.
In Elizabeth Warren's proposal, they would be subject to a 40% exit tax on the wealth that they moved. If they didn't pay the exit tax, that would be fraud.
Who would wait long enough after that bill passed to keep their wealth in America? The second it went through congress the money would start pouring out
To be clear, in Warren's wealth tax proposal, it doesn't matter where the wealth is located. If you're an American citizen, you would be required to pay the tax on all of your wealth above $50 million, no matter where it is.
The alternative is to move your money overseas and renounce your American citizenship, at which point you would owe a 40% exit tax.
One could certainly hide their assets overseas, but that would be tax fraud, and if discovered would result in prison time for both accountant and wealthy individual.
The alternative is to move your money overseas and renounce your American citizenship, at which point you would owe a 40% exit tax.
One could certainly hide their assets overseas, but that would be tax fraud, and if discovered would result in prison time for both accountant and wealthy individual.
As with most laws, the intention is noble but the outcome may not be. Every time a new law seems to be passed "strengthening" the tax code, it seems mysteriously effective against those who can't afford to pay a law firm's retainer and a lobbying group's salaries.
I agree as well. Also, luxury goods (yacht, private airplane, (maybe) jewellery, etc...) should be taxed much heavier than bare necessities (food, clothing).
I believe some basic amount of wealth should be tax free (e.g. x-amount of square meter living space per person in a household, a car with value up to 25.000 USD perhaps, etc...).
I also believe many ultra-wealthy people setup foundations to control their wealth after their deaths, avoid paying inheritance tax and keep wealth inside the family by being able to decide who is on the board of such foundations. Foundations are also used to peddle influence. I believe for these reasons that donations to foundations should not be tax exempt.
I believe some basic amount of wealth should be tax free (e.g. x-amount of square meter living space per person in a household, a car with value up to 25.000 USD perhaps, etc...).
I also believe many ultra-wealthy people setup foundations to control their wealth after their deaths, avoid paying inheritance tax and keep wealth inside the family by being able to decide who is on the board of such foundations. Foundations are also used to peddle influence. I believe for these reasons that donations to foundations should not be tax exempt.
Care to explain why? :-)
Economically, you sort of live in a flat tax. (https://www.nytimes.com/interactive/2019/10/06/opinion/incom...)
I know that's not what you mean. But if you simply filed a 1040EZ, then paid a 20% penalty when the IRS sends you a letter saying pay the rest of what you owe, expect to pay... 28 percentage points effective instead of 26.
This is to say that tax complexity is a red herring. You can already live in an almost zero-complexity tax obligation personally, as a wage earner, above and beyond what is officially prescribed. It's not really what it's about. It's probably not about saving money either.
I know that's not what you mean. But if you simply filed a 1040EZ, then paid a 20% penalty when the IRS sends you a letter saying pay the rest of what you owe, expect to pay... 28 percentage points effective instead of 26.
This is to say that tax complexity is a red herring. You can already live in an almost zero-complexity tax obligation personally, as a wage earner, above and beyond what is officially prescribed. It's not really what it's about. It's probably not about saving money either.
Looks like the 1040-EZ is no longer used, could you elaborate on this “hack” you’re suggesting is a flat tax solution?
I don’t know that flat tax is necessary - progressive taxation is a sane policy, as the marginal utility of money goes down the more of it you have, and therefore a larger tax burden is more easily borne - however addressing the gap between how asset and employment income are taxed is critical to combatting gross wealth asymmetry.
I write this as a member of the asset-owning class. I wasn’t always - I worked in the U.K., with my income automatically taxed via PAYE (Pay As You Earn), and paid between 20 and 45% effective tax rates on my earnings.
Now, my income is rentals and investments, and my effective tax rate is nearer 5%, on a much larger income than I ever had from employment. I’ve not done anything special or weird, I’ve just paid capital gains and written down the allowable expenses. It would not be hard to pay no tax, just by restructuring my finances a little, but it doesn’t sit well with me as it is.
Honestly, it’s nonsensical. At the very least asset income should be taxed at the same rates as labour income - but it should probably be taxed at a higher rate, as penalising productive labour and rewarding rent-seeking is ultimately contrary to the interests of everyone.
I write this as a member of the asset-owning class. I wasn’t always - I worked in the U.K., with my income automatically taxed via PAYE (Pay As You Earn), and paid between 20 and 45% effective tax rates on my earnings.
Now, my income is rentals and investments, and my effective tax rate is nearer 5%, on a much larger income than I ever had from employment. I’ve not done anything special or weird, I’ve just paid capital gains and written down the allowable expenses. It would not be hard to pay no tax, just by restructuring my finances a little, but it doesn’t sit well with me as it is.
Honestly, it’s nonsensical. At the very least asset income should be taxed at the same rates as labour income - but it should probably be taxed at a higher rate, as penalising productive labour and rewarding rent-seeking is ultimately contrary to the interests of everyone.
One could always tax land ownership. It cannot be hidden or escaped from. It's also the ultimate scarce resource and yet there are landlords who do nothing just draw rent from those who actually utilize the land.
An addendum re the UK: it's funny how the UK tax scheme is so punitive on the middle class. Earn 100k pounds gross and take home 50k. But the moment you become an asset owner, you can basically optimize all of it away. The two income brackets "supported" by the UK tax regime are the poorest and the richest.
An addendum re the UK: it's funny how the UK tax scheme is so punitive on the middle class. Earn 100k pounds gross and take home 50k. But the moment you become an asset owner, you can basically optimize all of it away. The two income brackets "supported" by the UK tax regime are the poorest and the richest.
How about removing income tax (hard to measure, easy to avoid by rich) and increasing vat by the same amount. Vat could be even added to stocks (buying $5000 of Tesla stocks? Pay 20% vat. This could probably end all short term speculations as well). Definitely to yacht and houses, vacations, butlers and gardeners, gold doorknobs, Ferraris, swimming pools, 200" LCDs, hotel stays, massages, anything that is consumption really)
Because this would absolutely shaft everyone other than the well off?
Because there would be no way at all of scaling the tax based on income / wealth? So someone earning almost nothing with no wealth would be expected to pay the same tax as a billionaire?
Because there would be no way at all of scaling the tax based on income / wealth? So someone earning almost nothing with no wealth would be expected to pay the same tax as a billionaire?
See the Fair Tax proposal for one way to address this problem. https://en.wikipedia.org/wiki/FairTax
A large UBI would address this OK, but FairTax seems to really work to keep the tax as regressive as possible without being quite so bad as a flat VAT. A "welfare payment" for "low-income earners" means you have to be in the system ("earner"), that income still has to be calculated, and that the payment is stigmatized ("welfare") instead of presented as an entitlement.
This also seems bad: "The proposed Fair Tax Act would apply a tax, once, at the point of purchase on all new goods and services for personal consumption" - "personal consumption" is arbitrary. A VAT tax applied everywhere for all goods would be fair and harder to avoid. Though even that seems like it would encourage financialization to hide material production.
This also seems bad: "The proposed Fair Tax Act would apply a tax, once, at the point of purchase on all new goods and services for personal consumption" - "personal consumption" is arbitrary. A VAT tax applied everywhere for all goods would be fair and harder to avoid. Though even that seems like it would encourage financialization to hide material production.
Yes thanks. That thing sounds like a Trojan horse; VAT and UBI is much better.
A flat tax simplifies one little bit of math, and doesn't really address loopholes and deductions. If you have an income tax you have to calculate "income". If I have a little store and buy gum for $1.00 and sell it for $1.10, it will not work well if that's counted as $1.10 of income. That $1.00 is a deduction. We can't eliminate them. It's a "loophole" when we think the deduction is not in the spirit of calculating income, but that's not an objective criteria.
A flat tax removes the benefit of shifting income to different entities to pursue lower marginal taxes, but I don't think that's the kind of abuse we're looking at here, nor is that abuse particularly scalable.
A flat tax removes the benefit of shifting income to different entities to pursue lower marginal taxes, but I don't think that's the kind of abuse we're looking at here, nor is that abuse particularly scalable.
I would like to have discussions even for "constant" tax.
Wrote more in the comments below:
https://news.ycombinator.com/item?id=27434369
https://news.ycombinator.com/item?id=27434819
Wrote more in the comments below:
https://news.ycombinator.com/item?id=27434369
https://news.ycombinator.com/item?id=27434819
That misses the point. The problem isn't income. The problem is there is no "simple" way to assess wealth.
Actually, simplest thing to do mathematically is to skip the dollar-denominated accounting entirely, and just pay the government in kind i.e. asset forfeiture / putting the means of production in partial state control.
e.g. the gov owns stock in a company based on the distribution of private ownership (is it equal like ESOP or unequal like Facebook and Google?), and without regard to the market price of the stock.
I challenge the mathematically literate in America to really think through this.
Actually, simplest thing to do mathematically is to skip the dollar-denominated accounting entirely, and just pay the government in kind i.e. asset forfeiture / putting the means of production in partial state control.
e.g. the gov owns stock in a company based on the distribution of private ownership (is it equal like ESOP or unequal like Facebook and Google?), and without regard to the market price of the stock.
I challenge the mathematically literate in America to really think through this.
A flat tax removes the simliest fairest part of the tax code and leaves all the bullshit and loopholes behind. Don't make the mistake of thinking you're (and my) experience of the tax code is anything like the actual code. We only see 0.001%. It's easy to consider only the things we see after all.
I'm not sure I agree with taxing the "wealth", instead of income. Sure, on paper, Buffett's wealth went up by $23B; but these are just imaginary numbers based on the whims of the market. The tax should be on what amount of money actually flowed into his bank account.
The problem is that there is no way to track what flows into his bank account. Evidence says that he can avoid being taxed on any dollars flowing to his bank account.
This wasn't a huge problem a century ago due to the Estate tax ensuring that estates would shrink over time and eventually be taxed. In stark contrast to European laws that required estates to be maintained in their entirety to preserve the aristocracy. If Buffett can avoid tax during life and death and pass on a preserved estate then there is no guardrail against a gentle class. Fundamentally it also means that we've setup a tax system more akin to a feudal system where workers pay taxes and aristocrats receive benefits.
This wasn't a huge problem a century ago due to the Estate tax ensuring that estates would shrink over time and eventually be taxed. In stark contrast to European laws that required estates to be maintained in their entirety to preserve the aristocracy. If Buffett can avoid tax during life and death and pass on a preserved estate then there is no guardrail against a gentle class. Fundamentally it also means that we've setup a tax system more akin to a feudal system where workers pay taxes and aristocrats receive benefits.
Off topic, just for your information: gentile in English is not the same word as in, for example, French.
The English word means not-Jewish whereas I think you probably meant gentle which has an archaic meaning of noble. See https://www.lexico.com/definition/gentle
The English word means not-Jewish whereas I think you probably meant gentle which has an archaic meaning of noble. See https://www.lexico.com/definition/gentle
The modern equivalent (though it is not often encountered either) is “genteel”, which I think roughly mimics the French pronunciation of the original word, but with a hard “g”. Sure looks like a cognate to me.
Great Callout! I've updated the text to reflect the correct word.
What are you talking about? You think Warren Buffet can covertly sell his holdings and not have anybody find out? If he executes any sales the brokers will have the records; if he transfer the funds to any bank in the world, there will be plethora of records for regulators to access. There's no way he can secretly hide large transfers.
The estate tax wasn't even enacted until 1916 so there wasn't a period of time where "estates would shrink over time" (for tax reasons, at least; the two World Wars plus inflation actually existing did lead to huge changes in the wealth distribution). And by the early 20th century land was no longer the single dominant form of capital in the portfolios of the wealthiest individuals.
Over the long term it makes sense. Over the short term it’s more difficult if the assets aren’t liquid.
You can follow this logic all the way down:
- tax on wealth
- tax on growth
- tax on capital gains
- tax on dollar deposits
- tax on spending
- tax on value-added
- tax on labor
Oh wait, that doesn't work at all.
- no tax
Which is the correct answer that ends up in everybody paying for the economy in proportion to their benefit from it. We're already operating like this: https://www.sifma.org/resources/research/us-treasury-securit...
- tax on wealth
- tax on growth
- tax on capital gains
- tax on dollar deposits
- tax on spending
- tax on value-added
- tax on labor
Oh wait, that doesn't work at all.
- no tax
Which is the correct answer that ends up in everybody paying for the economy in proportion to their benefit from it. We're already operating like this: https://www.sifma.org/resources/research/us-treasury-securit...
But what do you think about him borrowing money using his "worthless" stock as collateral?
Clearly the increase in stock price is valuable to banks. So why not the IRS?
Clearly the increase in stock price is valuable to banks. So why not the IRS?
What I don't understand is: If I (a wage slave) find a football sized diamond in my back yard, I'm suddenly very "wealthy". Should I be forced to pay taxes on that find because my wealth has increased?
What if I want to keep that diamond but cannot afford to because of the taxes?
Isn't that how business owners gain wealth: By the valuation defined by others to the thing they "found". Should we force Bezos et al to sell some of their stock in their companies to pay tax? Surely a $100m+ tax burden would do that?
What if I want to keep that diamond but cannot afford to because of the taxes?
Isn't that how business owners gain wealth: By the valuation defined by others to the thing they "found". Should we force Bezos et al to sell some of their stock in their companies to pay tax? Surely a $100m+ tax burden would do that?
You don't pay capital gains taxes until you sell the stock. The IRS only taxes you when you cash out. Presumably the articles will show the wealthy "cashing out" via loopholes that evade the tax.
The trick is to cash out by dying. You can do this by living off loans against your unrealized capital gains. These then get paid off at your death, and there are all kinds of "simple" ways to keep estate untaxed.
I have a friend who is a member of the ultra rich, and this is exactly how his family uses their portfolio. They currently can borrow with .03% interest through their brokerage.
What I’m curious about is at what level of funds flows does it make sense to start using these strategies. The average faang employees income is dominated by shares but a) they weren’t granted in the distant past when the prices were lower so the tax difference isn’t big between income and b) they have different risk tolerances as Bezos can lose half of his net worth and still be unable to spend all his money before he dies.
There must be some level where these strategies make sense but articles like this rarely point them out.
There must be some level where these strategies make sense but articles like this rarely point them out.
You do own taxes if you find a diamond. You don't owe taxes if you buy a rock for $10 and it increases in value to $50m.
If you want to keep something you find and can't afford to because of taxes, you either get a loan or have to sell it.
If you want to keep something you find and can't afford to because of taxes, you either get a loan or have to sell it.
> What if I want to keep that diamond but cannot afford to because of the taxes?
Then you have to sell it. This is no different from game show awards, where the “car” you ein is taxed at the car’s value, so unless you have enough savings, you have to sell the car to pay the taxes.
I don’t really see any problem with this though? Absolutely we should force Bezos to sell some of his stock to pay taxes: employees already have to do this when they’re given stock grants, why should it be any different for owners?
Then you have to sell it. This is no different from game show awards, where the “car” you ein is taxed at the car’s value, so unless you have enough savings, you have to sell the car to pay the taxes.
I don’t really see any problem with this though? Absolutely we should force Bezos to sell some of his stock to pay taxes: employees already have to do this when they’re given stock grants, why should it be any different for owners?
But why should someone be forced to sell parts of their business (stock) because that business has increased in value?
Or is that not the claim being made here? Isn't that the vast majority of the richests' wealth?
Or is that not the claim being made here? Isn't that the vast majority of the richests' wealth?
We have a system based around the notion that when a worker is given money or other value in exchange for work, part of their value increase needs to be transferred to the state. That is the same even if you get a car in compensation instead if a paycheck.
Why should the system be such that if you gain value without exchange of work, then suddenly you should not transfer anything to the state?
Yes that means that you might need to liquidate part of the asset to cover taxes on its value, just like paying a workers sallee by giving them a car might mean they need to sell it to cover taxes.
But it’s extremely odd to argue that there is some inherent “unfairness” in Musk or Buffet having to transfer part of their value increases to the state when we all agree every worker should do this.
Why should the system be such that if you gain value without exchange of work, then suddenly you should not transfer anything to the state?
Yes that means that you might need to liquidate part of the asset to cover taxes on its value, just like paying a workers sallee by giving them a car might mean they need to sell it to cover taxes.
But it’s extremely odd to argue that there is some inherent “unfairness” in Musk or Buffet having to transfer part of their value increases to the state when we all agree every worker should do this.
Why do we tax property more (outside California) when it increases in value? Didn’t the owner of it rightfully make a smart claim and stake out a great piece of land? Why should they be penalized by paying more when the land becomes worth more?
In short: there’s no amount of personal “hard work” that made Bezos’ company worth what it is: the vast majority of the gains are due to his employees’ work and having staked a claim on the right plots of business ventures. Absolutely Bezos should be rewarded for making those smart decisions, but why should he take the vast majority of the gains, when he was not responsible for the vast majority of the value added?
Allowing a few individuals to amass a fortune larger than the non-US NATO budget, while we’re at the same time facing human-extinction level threats, feels a little absurd on its face. Moving the needle towards any one individual only having more power than a few thousand average people, rather than a few million, seems fine?
In short: there’s no amount of personal “hard work” that made Bezos’ company worth what it is: the vast majority of the gains are due to his employees’ work and having staked a claim on the right plots of business ventures. Absolutely Bezos should be rewarded for making those smart decisions, but why should he take the vast majority of the gains, when he was not responsible for the vast majority of the value added?
Allowing a few individuals to amass a fortune larger than the non-US NATO budget, while we’re at the same time facing human-extinction level threats, feels a little absurd on its face. Moving the needle towards any one individual only having more power than a few thousand average people, rather than a few million, seems fine?
I mean, it's possible he paid tax on stock he got when he started Amazon. It just wasn't that much back then.
Also, forcing people to selling stock seems like something that can be abused - imagine stock spike like we had with GME this year, during change of address year followed by significant drop. You would probably have to pay more tax than stock is actually valued at.
Also, forcing people to selling stock seems like something that can be abused - imagine stock spike like we had with GME this year, during change of address year followed by significant drop. You would probably have to pay more tax than stock is actually valued at.
Note this happens all the time to people who vest stock, and then before the next trading window the stock tanks in value. The employee owes income tax on the stock they vested, at the time the stock was granted, then have capital losses for the drop in share price. Losing 90% of the value of say $1,000 of stock, you could still owe something like $300 in taxes on what is now worth $100. This is the normal world for employees.
I’m not totally sure why we would want billionaires to shoulder less downside risk than their wage earning employees?
I’m not totally sure why we would want billionaires to shoulder less downside risk than their wage earning employees?
This is a strawman argument.
Bezos did not stumble across Amazon while digging weeds in his back garden. He built a successful business through a mixture of hard work, risk, his contacts, laws and infrastructure that we collectively paid for.
It’s not downplaying his efforts to point out that he now contributes proportionally less to the country than he benefits from. This isn’t an accident, either. Bezos pays smart and connected people to push for lower taxes and then avoid as many of those as possible.
Bezos did not stumble across Amazon while digging weeds in his back garden. He built a successful business through a mixture of hard work, risk, his contacts, laws and infrastructure that we collectively paid for.
It’s not downplaying his efforts to point out that he now contributes proportionally less to the country than he benefits from. This isn’t an accident, either. Bezos pays smart and connected people to push for lower taxes and then avoid as many of those as possible.
No, it was a question, not an argument.
Let me restate it:
Buying a stock (or bitcoin) uses gobs of the same regulated, government-funded infrastructure. If that stock/coin becomes immensely valuable, that (the fact that I now have a high net worth) makes me "wealthy".
What I'm asking is: Please clarify whether the intent is to tax people based on their net worth (wealth), not their income.
The articles are not clear. They state that capital gains are lower than income taxes, but they are not 1%. Yet they state that Bezos paid less than 1% effective tax rate on his wealth increases. Implying that it's obvious we should have taxed that. It's not obvious. Presumably, and I'm asking for clarification here, he would eventually be taxed on that wealth when he liquidates it.
If so, forcing someone to liquidate by placing a high tax burden on them is unprecedented for stock holdings and other forms of wealth, but not unprecedented for, say, land valuations.
What I'm asking is: Please clarify whether the intent is to tax people based on their net worth (wealth), not their income.
The articles are not clear. They state that capital gains are lower than income taxes, but they are not 1%. Yet they state that Bezos paid less than 1% effective tax rate on his wealth increases. Implying that it's obvious we should have taxed that. It's not obvious. Presumably, and I'm asking for clarification here, he would eventually be taxed on that wealth when he liquidates it.
If so, forcing someone to liquidate by placing a high tax burden on them is unprecedented for stock holdings and other forms of wealth, but not unprecedented for, say, land valuations.
Look at the countless issues raised by people being unable to exercise stock options for tax reasons. It’s clear that taxing stock is NOT unprecedented.
We’ve seen repeatedly over the past 50 years that Bezos will NOT be taxed of that wealth under the current system.
There’s nothing sacred about different types of wealth. The question is whether society can benefit more from taxing and redistributing that wealth, or whether Bezos can by hoarding it.
I don’t just mean the raw tax receipts either. Tax policy influences behaviour, too. This has ups and downs but arguing about finding diamonds in the dirt isn’t a remotely similar analogue to the discussion at hand.
We’ve seen repeatedly over the past 50 years that Bezos will NOT be taxed of that wealth under the current system.
There’s nothing sacred about different types of wealth. The question is whether society can benefit more from taxing and redistributing that wealth, or whether Bezos can by hoarding it.
I don’t just mean the raw tax receipts either. Tax policy influences behaviour, too. This has ups and downs but arguing about finding diamonds in the dirt isn’t a remotely similar analogue to the discussion at hand.
> Look at the countless issues raised by people being unable to exercise stock options for tax reasons. It’s clear that taxing stock is NOT unprecedented.
It is unprecedented to tax someone on the value of their unsold stock. That's what a wealth tax would be: We force someone to pay taxes on something (their holdings / net worth) simply because it is valuable, but not necessarily because it was liquidated into cash (sold). (like we do with land, but not stocks).
> There’s nothing sacred about different types of wealth. The question is whether society can benefit more from taxing and redistributing that wealth, or whether Bezos can by hoarding it.
I think the answer to my question is: Yes, taxing wealth is one way of extracting more public funds from those who are the most wealthy, and many such ways should be considered.
I don't advocate for/against this, I just want to understand and find appropriate analogies.
Propublica seems to have taken advocacy a priori, when comparing wealth to income, and that was confusing to me because it is actually a drastic change without precedent that I'm aware of (except perhaps land ownership).
It is unprecedented to tax someone on the value of their unsold stock. That's what a wealth tax would be: We force someone to pay taxes on something (their holdings / net worth) simply because it is valuable, but not necessarily because it was liquidated into cash (sold). (like we do with land, but not stocks).
> There’s nothing sacred about different types of wealth. The question is whether society can benefit more from taxing and redistributing that wealth, or whether Bezos can by hoarding it.
I think the answer to my question is: Yes, taxing wealth is one way of extracting more public funds from those who are the most wealthy, and many such ways should be considered.
I don't advocate for/against this, I just want to understand and find appropriate analogies.
Propublica seems to have taken advocacy a priori, when comparing wealth to income, and that was confusing to me because it is actually a drastic change without precedent that I'm aware of (except perhaps land ownership).
> It is unprecedented to tax someone on the value of their unsold stock.
You mean unprecedented in the US, right? European countries have been trying various wealth taxes on and off for some time now, some of which count global assets including stocks.
You mean unprecedented in the US, right? European countries have been trying various wealth taxes on and off for some time now, some of which count global assets including stocks.
When Jeff Bezos buys a yacht, he doesn't buy it with Amazon stock. He cashes out that stock and then buys the yacht.
I think a fair approach would be to use their total net worth as the threshhold for which wealth taxes apply, but taxes are only paid when that stock is turned into actual money, or equivalent. If you're not cashing out your company holdings, if your wealth is only "on paper", then you owe nothing. But if you try to start cashing that out, then you owe the wealth tax, and you don't get any proceeds until you pay off that tax first. Note that this would be on top of capital gains taxes.
I think a fair approach would be to use their total net worth as the threshhold for which wealth taxes apply, but taxes are only paid when that stock is turned into actual money, or equivalent. If you're not cashing out your company holdings, if your wealth is only "on paper", then you owe nothing. But if you try to start cashing that out, then you owe the wealth tax, and you don't get any proceeds until you pay off that tax first. Note that this would be on top of capital gains taxes.
But the article lays out wealth as a baseline, stating that taxes paid are a small percentage of the wealth increases. Wealth is mostly unliquidated because it is stock.
If I'm understanding the argument correctly, the proposition is that we should ( morally, not legally ) have levied additional taxes on these folks because their net worth has gone up as calculated by the value of things they own, like stock. I find that surprising and somewhat unintuitive. Thanks for clarifying.
If I'm understanding the argument correctly, the proposition is that we should ( morally, not legally ) have levied additional taxes on these folks because their net worth has gone up as calculated by the value of things they own, like stock. I find that surprising and somewhat unintuitive. Thanks for clarifying.
I think you're correct in how you're characterizing the general consensus around wealth tax - that people should be taxed based on all accumulated wealth, including unrealized gains. I don't know how practical that is. I think an approach that frames it as 100% capital gains and/or marginal income tax rate on equivalent to the first 2-3% of your total gross wealth is more workable.
He almost certainly doesn’t cash out his stock because of the tax impact. He gets a loan collateralized by his shares.
Exercising stock options is a unique case. If I as an employer give you $10m worth of stock (through grants or options), you have something akin to an "income" of $10m on the receipt of that stock. (For the record I disagree with taxing stock grants/options until they're realized and the proceeds can be used to pay the accompanying tax burden.)
If I give you $1 worth of stock and it appreciates to $10m, you have capital gains that will be taxed when you realize those gains.
If I give you $1 worth of stock and it appreciates to $10m, you have capital gains that will be taxed when you realize those gains.
Should you be able to take out a million dollar loan against the diamond, use the loan to buy stocks, and claim a loss on the year? Then the stocks increase in value, you're able to take out a new loan against them, and use that to pay off the diamond loan. Now you have a diamond, stocks, and no taxable income. Of course, you rinse and repeat.
Maybe we need to re-examine the definition of "realized gains".
Maybe we need to re-examine the definition of "realized gains".
When you own stocks, you don't pay taxes every time the value of your portfolio changes. You only pay capital gains when you sell those stocks.
Your example isn't really that much different. You would only really need to pay taxes on that diamond when you sell it, in which case you would just use the proceeds of the sale to cover that.
Your example isn't really that much different. You would only really need to pay taxes on that diamond when you sell it, in which case you would just use the proceeds of the sale to cover that.
Right. But the article (and I think the general consensus around the movement) states that the net worth (wealth) is a missed tax opportunity, regardless of whether it is liquidated. Is that correct?
It seems like this is missing the obvious focal point: loans taken out by individuals against assets like stock options and equities should be taxed as income. It's trivial to evade income tax when you have accumulated wealth in equities by taking out a loan against the equities and then progressively liquidating them at capital gains tax rates to fulfil the loan payments. If every loan taken out by Elon Musk or Jeff Bezos against their corporate assets were treated as income, I suspect we'd see a much larger share of tax paid by them.
edit: How do I make the same point as u/fairity 5 minutes prior but accumulate down votes? lol
edit: How do I make the same point as u/fairity 5 minutes prior but accumulate down votes? lol
Why does this matter? The real problem is that the capital gains tax rate is below the income tax you would have to pay for the same income. Either you adjust the capital gains tax upwards to match income taxes or you replace it completely with income taxes. You don't need a complicated loan tax.
They explain it well in the full article:
https://www.propublica.org/article/the-secret-irs-files-trov...
>So how do megabillionaires pay their megabills while opting for $1 salaries and hanging onto their stock? According to public documents and experts, the answer for some is borrowing money — lots of it.
>For regular people, borrowing money is often something done out of necessity, say for a car or a home. But for the ultrawealthy, it can be a way to access billions without producing income, and thus, income tax.
>The tax math provides a clear incentive for this. If you own a company and take a huge salary, you’ll pay 37% in income tax on the bulk of it. Sell stock and you’ll pay 20% in capital gains tax — and lose some control over your company. But take out a loan, and these days you’ll pay a single-digit interest rate and no tax; since loans must be paid back, the IRS doesn’t consider them income.
https://www.propublica.org/article/the-secret-irs-files-trov...
>So how do megabillionaires pay their megabills while opting for $1 salaries and hanging onto their stock? According to public documents and experts, the answer for some is borrowing money — lots of it.
>For regular people, borrowing money is often something done out of necessity, say for a car or a home. But for the ultrawealthy, it can be a way to access billions without producing income, and thus, income tax.
>The tax math provides a clear incentive for this. If you own a company and take a huge salary, you’ll pay 37% in income tax on the bulk of it. Sell stock and you’ll pay 20% in capital gains tax — and lose some control over your company. But take out a loan, and these days you’ll pay a single-digit interest rate and no tax; since loans must be paid back, the IRS doesn’t consider them income.
Every time someone tries to make a tax targeting the ultra rich, it ends up hurting the moderately wealthy instead.
Every. Single. Time.
The worse tax situation is always the person who makes 500k in a good year, or sells a house they held for 25 years which went up a bunch in value.
I suspect this is a significant factor in social mobility. Our tax system is punitive to people who try to leave the working class.
Every. Single. Time.
The worse tax situation is always the person who makes 500k in a good year, or sells a house they held for 25 years which went up a bunch in value.
I suspect this is a significant factor in social mobility. Our tax system is punitive to people who try to leave the working class.
How does this effect social mobility? I agree the tax system is unfair towards those in the 1% but not 0.001%, but I don't see how it is so punitive that those earning 500k or owning appreciating assets are taxed back down to a lower social class. And no one reaches those upper echelons by saving their 500k/year or holding their house for a really long time.
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The general idea is average people don't make 500k/yr. What they might do though is have a one time event that earns them 500k in a single year, like selling a small business or a house. In that one year where they finally did well the tax system comes in and hits them even harder with laws intended for someone who makes 500k every year.
Working-class people don’t own small businesses worth hundreds of thousands of dollars, if you’re in that position you’re already middle-class.
You’re not actually talking about the “moderately wealthy.” Just because billionaires are insanely wealthy doesn’t change the fact that a household making $500,000 is still incredibly wealthy.
There’s already an exemption for capital gains tax on the sale of primary homes. $500,000 for married couples, and you can remove the cost basis and cost of improvements from the equation.
In other words, almost nobody is taxed on the sale of their primary home.
A household that makes $500k on a good year is actually in the 1% statistically. They have left the working class long ago. They could work for about 7-10 years in their career and retire with an above-median salary (withdrawing following the 4% rule) in perpetuity. That is by definition not the working class: that family barely has to work in order to secure a lifetime of comfortable living if they don’t inflate their lifestyle.
In my view, your comment acts as an implication of support for regressive tax policy that hurts the actual working class. No, moderately wealthy people do not need help. No, we are not temporarily embarrassed millionaires held back from generational wealthy only by government tax policy – that’s a farce sold to us by the very billionaires that want to avoid being taxed. They want us to think that taxes hurt us more than they hurt them, which is mathematically not true.
They want us to think that “if only our taxes were cut, we could go back to affording a middle class lifestyle.” It’s not true.
There’s already an exemption for capital gains tax on the sale of primary homes. $500,000 for married couples, and you can remove the cost basis and cost of improvements from the equation.
In other words, almost nobody is taxed on the sale of their primary home.
A household that makes $500k on a good year is actually in the 1% statistically. They have left the working class long ago. They could work for about 7-10 years in their career and retire with an above-median salary (withdrawing following the 4% rule) in perpetuity. That is by definition not the working class: that family barely has to work in order to secure a lifetime of comfortable living if they don’t inflate their lifestyle.
In my view, your comment acts as an implication of support for regressive tax policy that hurts the actual working class. No, moderately wealthy people do not need help. No, we are not temporarily embarrassed millionaires held back from generational wealthy only by government tax policy – that’s a farce sold to us by the very billionaires that want to avoid being taxed. They want us to think that taxes hurt us more than they hurt them, which is mathematically not true.
They want us to think that “if only our taxes were cut, we could go back to affording a middle class lifestyle.” It’s not true.
>>A household that makes $500k on a good year is actually in the 1% statistically. They have left the working class long ago. They could work for about 7-10 years in their career and retire with an above-median salary (withdrawing following the 4% rule) in perpetuity. That is by definition not the working class: that family barely has to work in order to secure a lifetime of comfortable living.<<
The "in a good year" qualifier in both your comment and the parent comment means that your conclusion that this person has left the "working class" is untrue. It's not uncommon to get a windfall (stock option vesting cliff, inheritance, capital gains, etc.) that boosts income in a single year to many multiples of one's typical income. Such an occurrence does not boost the recipient out of the working class. Managed carefully, it can change their life (buy a house, turbo-charge retirement savings, etc.) but no one's buying a private island with a single year of $500k income.
The "in a good year" qualifier in both your comment and the parent comment means that your conclusion that this person has left the "working class" is untrue. It's not uncommon to get a windfall (stock option vesting cliff, inheritance, capital gains, etc.) that boosts income in a single year to many multiples of one's typical income. Such an occurrence does not boost the recipient out of the working class. Managed carefully, it can change their life (buy a house, turbo-charge retirement savings, etc.) but no one's buying a private island with a single year of $500k income.
Of course it does. The working class doesn’t get stock options, vesting cliffs, inheritance, or capital gains!
Or much of a savings account or 401k, for that matter.
The option to stop working for more than a few weeks or months takes you squarely out of the working class.
Basically, what I’m trying to say is that the parent comment to ours is attempting to advocate for taxing just the billionaires and not to tax the moderately wealthy so much. I think that’s a flawed argument, because the moderately wealthy don’t need help, and are perhaps even more wealthy than they realize.
Or much of a savings account or 401k, for that matter.
The option to stop working for more than a few weeks or months takes you squarely out of the working class.
Basically, what I’m trying to say is that the parent comment to ours is attempting to advocate for taxing just the billionaires and not to tax the moderately wealthy so much. I think that’s a flawed argument, because the moderately wealthy don’t need help, and are perhaps even more wealthy than they realize.
> The working class doesn’t get stock options, vesting cliffs, inheritance, or capital gains!
robinhood.com would beg to differ. Anyone can invest in the stock market and get capital gains.
robinhood.com would beg to differ. Anyone can invest in the stock market and get capital gains.
Not at the 500k level most of them aren't getting capital gains. Or is this "anyone can be a multimillionaire - just play the lottery and get lucky" level of technically true?
They're getting capital gains any time they sell a stock for more than they paid.
There's no magic threshhold of $500k.
There's no magic threshhold of $500k.
>There's no magic threshhold of $500k.
In the US in 2021 (aka, right now) the magic threshold for capital gains is $445,850-$501,600 depending on filing status. So you're technically correct that $500k isn't a magic threshold, but it's certainly in the middle of it.
But more importantly, you're going down a technical rabbithole. The point of this comment chain is "what happens to people experiencing a one-time windfall capital gains of $500,000". The response was "what about RH investors". My point was they weren't making 500k, so it was irrelevant that they made income taxed as a capital gain. And I stand by that.
In the US in 2021 (aka, right now) the magic threshold for capital gains is $445,850-$501,600 depending on filing status. So you're technically correct that $500k isn't a magic threshold, but it's certainly in the middle of it.
But more importantly, you're going down a technical rabbithole. The point of this comment chain is "what happens to people experiencing a one-time windfall capital gains of $500,000". The response was "what about RH investors". My point was they weren't making 500k, so it was irrelevant that they made income taxed as a capital gain. And I stand by that.
> they weren't making 500k, so it was irrelevant that they made income taxed as a capital gain
Sorry, but capital gains taxes start at $15,000.
Sorry, but capital gains taxes start at $15,000.
> Sorry, but capital gains taxes start at $15,000
Long-term capital gains less than $40,400 (or higher, depending on filing status) have a 0% rate.
Long-term capital gains less than $40,400 (or higher, depending on filing status) have a 0% rate.
> In the US in 2021 (aka, right now) the magic threshold for capital gains is $445,850-$501,600 depending on filing status.
No, its not.
The transition point between the top (20%) and middle (15%; the bottom is zero) marginal rate of long-term capital gains rates are either exactly the top or bottom of that range for 3 of 4 tax filing statuses (you left off married filing separately, which is much lower than even the low end), but that’s not a “magic threshold” by any reasonable definition.
No, its not.
The transition point between the top (20%) and middle (15%; the bottom is zero) marginal rate of long-term capital gains rates are either exactly the top or bottom of that range for 3 of 4 tax filing statuses (you left off married filing separately, which is much lower than even the low end), but that’s not a “magic threshold” by any reasonable definition.
It's both a magic number and a threshold. Married filing separately is just 1/2 of married filing jointly, which is how it should be.
> It's both a magic number and a threshold
Its a threshold, but not one below which capital gains stops mattering, which was the significance falsesly ascribed to the “magic number".
If you had cited the bottom of the 15% bracket instead of the top as the magic number below which cap gains don’t matter, well, “magic” would still be overdramatic but you would at leaast have something of a point. But that’s close to an order of magnitude lower.
Its a threshold, but not one below which capital gains stops mattering, which was the significance falsesly ascribed to the “magic number".
If you had cited the bottom of the 15% bracket instead of the top as the magic number below which cap gains don’t matter, well, “magic” would still be overdramatic but you would at leaast have something of a point. But that’s close to an order of magnitude lower.
It's also irrelevant as I called out in my post. The question was "how do we tax average people making a windfall of 500k", not "let's talk exclusively long-term capital gains"
Plenty of normal working class people get options if they work at a tech company.
When I worked at Home depot as a lot boy I got stock options
I think you're extending "working class" to mean "people who live on wages instead of capital". But most people make an additional distinction inside wage earners between workers and professionals, i.e. mechanics, factory workers, nurses, assistants vs. doctors, lawyers, software engineers, managers, etc.
It's helpful in this little side discussion because policies that might affect people with (as GP says) any ability to make six figures in a year are pretty different than those that affect people without. The "works for a living" distinction isn't super relevant.
It's helpful in this little side discussion because policies that might affect people with (as GP says) any ability to make six figures in a year are pretty different than those that affect people without. The "works for a living" distinction isn't super relevant.
>I think you're extending "working class" to mean "people who live on wages instead of capital". But most people make an additional distinction inside wage earners between workers and professionals, i.e. mechanics, factory workers, nurses, assistants vs. doctors, lawyers, software engineers, managers, etc.
This is a meaningless distinction because there was a time where mechanics and factory workers also made 6 figure salaries. The divide should always be between someone who makes most of their money from labor rather than capital. Actors and basketball players are not people that I think should necessarily be more impacted by a wealth tax.
This is a meaningless distinction because there was a time where mechanics and factory workers also made 6 figure salaries. The divide should always be between someone who makes most of their money from labor rather than capital. Actors and basketball players are not people that I think should necessarily be more impacted by a wealth tax.
It maybe was meaningless when that was true, but unfortunately it isn't now. There are so many differences between the professional class and the working class that it's hard to really think where to start, huge things like health outcomes, educational opportunities, bankruptcy risk, air pollution, wealth generation, political engagement, social politics, fertility rate.
I don't disagree that there are also huge differences between people making income from wages vs. capital, but that's beside the point.
Your comment about actors and basketball players confuses me a little. I think those are textbook high wage earners, not people who primarily live on capital (at least until they retire anyway). And presumably yeah, once you cross $100m (which I would guess not that many actors/athletes really do), it seems reasonable for a wealth tax to kick in. Isn't wealth wealth? Why should we make carve outs for specific professions?
I don't disagree that there are also huge differences between people making income from wages vs. capital, but that's beside the point.
Your comment about actors and basketball players confuses me a little. I think those are textbook high wage earners, not people who primarily live on capital (at least until they retire anyway). And presumably yeah, once you cross $100m (which I would guess not that many actors/athletes really do), it seems reasonable for a wealth tax to kick in. Isn't wealth wealth? Why should we make carve outs for specific professions?
I don't want to diminish the importance of the distinction between income coming from wages vs capital, but I think there is also an important divide between people who are able to get ahead/accumulate wealth, and those who have to work as hard as they can just to scrape by.
> It's not uncommon to get a windfall (stock option vesting cliff, inheritance, capital gains, etc.) that boosts income in a single year to many multiples of one's typical income
Estate taxes don't kick in for estates worth less than $11.58 million and most states make immediate family exempt from all inheritance taxes.
Estate taxes don't kick in for estates worth less than $11.58 million and most states make immediate family exempt from all inheritance taxes.
that’s the point - ultra rich main concern is not a number in the bank, but that they remain “on top”, so of course they lobby for more taxes which would make it harder for others to approach them in the amount of wealth
One of the lobby tactics the ultra rich use is to try and push a tax hike/new tax to hit as many people as possible to stall its implementation.
Then they also go on an all out propaganda offensive to act like it'll hit even more than that.
Then they also go on an all out propaganda offensive to act like it'll hit even more than that.
> Every time someone tries to make a tax targeting the ultra rich, it ends up hurting the moderately wealthy instead. Every. Single. Time.
Could you please share some of the situations you're thinking about here? I'm not familiar.
Could you please share some of the situations you're thinking about here? I'm not familiar.
If you have just enough assets to be "rich" but don't have enough to purchase tax assistance, you've become unprotected prey. Everyone that can afford this tax assistance has a lower cost of business than you, everyone poorer has a lower tax burden.
Very interesting concept. This happens with lawsuits. If you have enough money/assets to be an attractive target for a lawsuit, but you don’t have enough to pay to defend the lawsuit, you are also “unprotected prey”.
An example: in SF/LA (California), a decent civil litigator will cost about $400+/hr. And a lawsuit will run for 1-3 years. When you add all the legal costs up, it turns out that just to defend yourself, you’ll need to spend about $100-$200k. So, unless you have quite a bit of money, you’ll have to either default or settle in maybe not very favorable terms. Either way, you might end up bankrupt, in debt for a long time, or just with no savings at all.
An example: in SF/LA (California), a decent civil litigator will cost about $400+/hr. And a lawsuit will run for 1-3 years. When you add all the legal costs up, it turns out that just to defend yourself, you’ll need to spend about $100-$200k. So, unless you have quite a bit of money, you’ll have to either default or settle in maybe not very favorable terms. Either way, you might end up bankrupt, in debt for a long time, or just with no savings at all.
I'd love to see some data on how big a deal this really is, because I would normally assume that by the time you've reached the levels of wealth we're talking about, "tax assistance" is a trivial expense.
I think at this level, tax protection isn't 'hiring a decent accountant' or 'donate $10,000 to charity', but instead is 'moving your base of operations off-shore' and things like that. Things you can do with a ten-million dollar income, but not a half-million.
Yes. And the reason for that is the cost of lawyers to setup and run the structure. Lawyers could actually charge less and open access to more people, but then it wouldn’t be as exclusive.
Mc_Big_G(3)
I agree with your general point, but your specific example of selling highly appreciated real estate is a poor one, since you incur no tax when selling your primary residence (up to something like $500k gain - over your cost basis which includes any capital improvement you made to the property) as long as you lived there for two of the last five years.
It’s a huge tax advantage for homeowners. One could argue that it is in itself unfair as it advantages people who already have large assets over those who do not.
It’s a huge tax advantage for homeowners. One could argue that it is in itself unfair as it advantages people who already have large assets over those who do not.
> (up to something like $500k gain - over your cost basis which includes any capital improvement you made to the property)
In a lot of markets this absolutely hits the "moderately wealthy trying to leave the working class". Bay Area houses that went for $1.2M in 2009 now go for about $3M, for a gain of $1.8M. That's well over the $500K exclusion, even including capital improvements.
Few folks will shed a tear for people who own a $3M house simply by virtue of living in a hot area, but that's exactly who the OP is talking about.
In a lot of markets this absolutely hits the "moderately wealthy trying to leave the working class". Bay Area houses that went for $1.2M in 2009 now go for about $3M, for a gain of $1.8M. That's well over the $500K exclusion, even including capital improvements.
Few folks will shed a tear for people who own a $3M house simply by virtue of living in a hot area, but that's exactly who the OP is talking about.
In the US, simply owning a house that's worth $3M (and literally zero other assets of any kind) puts you in the top 1.5% of the wealth distribution, per the WID. So I'm not sure how you could classify this scenario as "moderately wealthy trying to leave the working class." More like "extremely wealthy people trying to become even more wealthy."
The people who live in hot real estate areas for years made them the hot real estate areas. Real estate appreciation isn't free money. It's people who risked moving into an area and brought their culture with them. This is what creates the value.
Just because middle class people benefit from the subsidy of low interest rates that create asset bubbles does not mean that the people who raised families in a neighbourhood or a city are somehow undeserving of the rewards on their equity.
The idea that money not taken in taxes is an "expenditure," or an advantage, and this idea of accounting for the hypothetical opportunity cost of not taking some peoples money as a tax privilege is bizzare.
Just because middle class people benefit from the subsidy of low interest rates that create asset bubbles does not mean that the people who raised families in a neighbourhood or a city are somehow undeserving of the rewards on their equity.
The idea that money not taken in taxes is an "expenditure," or an advantage, and this idea of accounting for the hypothetical opportunity cost of not taking some peoples money as a tax privilege is bizzare.
>brought their culture with them.
Yikes. Do you really think places like SOMA, SLU, DTLA, etc. got better because rich people brought their 'culture' there? I'd recommend you visit said places and see for yourself, most of the 'culture' is in adjacent (usually historically minority) neighborhoods.
Yikes. Do you really think places like SOMA, SLU, DTLA, etc. got better because rich people brought their 'culture' there? I'd recommend you visit said places and see for yourself, most of the 'culture' is in adjacent (usually historically minority) neighborhoods.
Specifically, I said that rich(er) people go to those places because the people who were there before them made those places appealing. Poor(er) people who made due and built a community with businesses and neighboors that attracted others. As for why people who say 'yikes' seem to scare so easily, the concern is noted and ignored.
In those places there is a huge value difference between the adjacent neighborhoods and the rich neighborhoods. This is primarily due to a culture of stability and safety
What are you trying to say? That DTLA is safer/cheaper than Little Tokyo (you're wrong)? That SOMA is safer than the Mission(you're wrong)? That SLU is safer than Capitol Hill(you're wrong)?
> in adjacent (usually historically minority) neighborhoods.
These are the people that brought their culture. Their housing is probably also well appreciated.
These are the people that brought their culture. Their housing is probably also well appreciated.
It's amazing how often people on HN think that working class minorities have equal access to owning their own homes, despite huge evidence to the contrary.
https://usafacts.org/articles/homeownership-rates-by-race/
https://usafacts.org/articles/homeownership-rates-by-race/
"Well, this tax might still hit someone at the upper-upper-end of the middle class if they live in the fastest-appreciating real estate market in history" seems equivalent to admitting that it does not hit the middle class generally.
It also encourages liquidity in the residential real estate market… which seems to be a net good thing.
When a person moves house, the proceeds from the sale of the old house are used to buy the new house.
If someone has lived in an area for a long time, wants to move across the street to an otherwise identical house with the same value, why should they be taxed for that move but not for simply living in the first house?
This is exactly what happens. If you buy house #2 within 90 days, you can do a 1031 (I think?) property exchange. Then you don’t pay taxes on the first sale.
1031 exchanges are not available to homeowners, they are exclusively available for investment properties. Homeowners receive a $250k/$500k tax shelter as discussed above.
And this is why property prices are insane.
Investments of all kind receive generous tax breaks even when they're simple rent seeking.
So you get the triple whammy of unaffordable prices with unaffordable rents with downward pressure on wages - because the rent-seeking behaviour of share holders is privileged over the value of the work that underpins it.
It's not just a recipe for economic disaster for most of the population, it's also a recipe for political instability. In a democracy everyone should feel like the system is working in their interests.
When essentials become unaffordable and pricing becomes punitive and extortionate, people get angry and start to act in insane ways.
Investments of all kind receive generous tax breaks even when they're simple rent seeking.
So you get the triple whammy of unaffordable prices with unaffordable rents with downward pressure on wages - because the rent-seeking behaviour of share holders is privileged over the value of the work that underpins it.
It's not just a recipe for economic disaster for most of the population, it's also a recipe for political instability. In a democracy everyone should feel like the system is working in their interests.
When essentials become unaffordable and pricing becomes punitive and extortionate, people get angry and start to act in insane ways.
The $250/$500k is a one-time benefit and you will absolutely take advantage of it when you sell your home.
The idea of taxing this "profit" for the home owner would be insane. The investment and re-investment in real-estate drives a big majority of the economy.
I'm for modifying 1031 for investors who rent their properties. \
The idea of taxing this "profit" for the home owner would be insane. The investment and re-investment in real-estate drives a big majority of the economy.
I'm for modifying 1031 for investors who rent their properties. \
For a 1031 exchange you can only exchange an investment property for another investment property. You cannot use it for your primary residence. You have 45 days after close of escrow on your sale to identify up to three properties to purchase. You then have 180 days from close of first property to close one of the three listed.
This tax deferment only applies to investment property. As I understand it, if you're living there, then 1031 is not an option for you.
This is generally only true for investors, not for people who buy real estate for the sole purpose of obtaining lodging
Another point is that $500k is not in the 1% everywhere. In the Bay Area, it wouldn’t even put you at the top 5%.
https://www.nytimes.com/interactive/2019/08/01/upshot/are-yo...
https://www.nytimes.com/interactive/2019/08/01/upshot/are-yo...
But the Bay Area's high prices are driven by scarcity + demand, not intrinsic cost. So if everyone had a higher tax burden, I'd expect costs to come down.
That's absurd. If everyone had a higher tax burden social mobility would be completely destroyed.
Californians will never vote away prop 13 so property taxes will never go up, even in this imaginary increased tax burden scenario. With incomes taxed higher, prices would not come down at all.
No one would want to sell their houses, as they could never afford a new one after taxes. Prices would continue to be propped up by real estate investment wealth that is largely unaffected by this increased tax burden. No one could afford to buy a first home as their income is taxed to a degree that saving up for a 20% down payment would require being in the 1% of CA income or saving up frugally for >10 years.
Californians will never vote away prop 13 so property taxes will never go up, even in this imaginary increased tax burden scenario. With incomes taxed higher, prices would not come down at all.
No one would want to sell their houses, as they could never afford a new one after taxes. Prices would continue to be propped up by real estate investment wealth that is largely unaffected by this increased tax burden. No one could afford to buy a first home as their income is taxed to a degree that saving up for a 20% down payment would require being in the 1% of CA income or saving up frugally for >10 years.
I bought in SF recently with a 5% down payment without waiving most of the contingencies.
Unless a huge earthquake hits it, the Bay area will always be worth more than central Kansas.
At a minimum, there is one simple reason for this - the amount of infrastructure investment over the years (power, sewer, roads, etc), of which there is basically none in central Kansas, but loads of in the bay area.
At a minimum, there is one simple reason for this - the amount of infrastructure investment over the years (power, sewer, roads, etc), of which there is basically none in central Kansas, but loads of in the bay area.
It has nothing do with physical infrastructure and everything to do with social infrastructure - the people and organizations that are located there.
And the weather.
And the weather.
The value of the land at Burning Man is much lower than the Bay Area, even though it has many of the same people.
I think the infrastructure is pretty important. Disregarding it entirely seems a bit much. Even a bad neighborhood in Philly has more value per square foot than farmland in Kansas.
I think the infrastructure is pretty important. Disregarding it entirely seems a bit much. Even a bad neighborhood in Philly has more value per square foot than farmland in Kansas.
> The value of the land at Burning Man is much lower than the Bay Area, even though it has many of the same people.
You're proving GP's point. People from the Bay Area go to a desolate desert in the dead of summer because of the social aspects of Burning Man - the land is worthless because its a desert, owned by the Federal government, and they only stay a week out of the year. They bring the infrastructure with them, from stadium audio equipment to porta-poties to wireless equipment.
You're proving GP's point. People from the Bay Area go to a desolate desert in the dead of summer because of the social aspects of Burning Man - the land is worthless because its a desert, owned by the Federal government, and they only stay a week out of the year. They bring the infrastructure with them, from stadium audio equipment to porta-poties to wireless equipment.
Plus beaches, mountains, culture. (I do like Kansas people better than my neighbors though?)
Or Kansans, as we call them in the business
What is the "intrinsic cost" of 1200 square meters of the Earth's surface?
[deleted]
I agree.
As someone from a poor family, never received inheritance of any kind, and now (40 years old) makes +/- $1M per year, I climbed through every 'tax bracket'. The income tax system is absolutely designed to make it very hard to move through working class into middle class, and then from middle class to upper middle class.
Once you have escape velocity, you've got room to move with debt facilities and other options. Everyone wants to give you free, high quality banking services. It gets easier. But moving from, say $70K to $500K is very very hard specifically because of taxes.
For a very long time, the cumulative sum of taxes I'd paid were more than the money I actually had in my account, to invest and pay for things.
Ted Cruz was right, taxes should fit on a postcard for everyone.
And no, unrealized investments shouldn't be taxed and no one except do-nothing journalists are surprised to learn that they aren't - this ProPublica article is really the definition of fake news.
Actually let me just say what it is: propaganda leaked in order to build support for the president's tax increases, which are a very bad idea.
As someone from a poor family, never received inheritance of any kind, and now (40 years old) makes +/- $1M per year, I climbed through every 'tax bracket'. The income tax system is absolutely designed to make it very hard to move through working class into middle class, and then from middle class to upper middle class.
Once you have escape velocity, you've got room to move with debt facilities and other options. Everyone wants to give you free, high quality banking services. It gets easier. But moving from, say $70K to $500K is very very hard specifically because of taxes.
For a very long time, the cumulative sum of taxes I'd paid were more than the money I actually had in my account, to invest and pay for things.
Ted Cruz was right, taxes should fit on a postcard for everyone.
And no, unrealized investments shouldn't be taxed and no one except do-nothing journalists are surprised to learn that they aren't - this ProPublica article is really the definition of fake news.
Actually let me just say what it is: propaganda leaked in order to build support for the president's tax increases, which are a very bad idea.
That you consider yourself upper middle class with an income of 1M a year already says a lot about how skewed your view is (not surprising there was some article on HN recently about research showing that the rich and the poor consider themselves middle class both). Sure you are not a billionaire but you are not middle class anymore, you earn 30 times the median income in the US. Now comparing yourself with the superrich might make you think you're not that rich, but you are.
have you heard about different cost of living in different places?
What if the person plans to fund himself/herself in the retirement and pay for kids college rather than expecting all that "for free" from the government?
There is no metro region on Earth where $1M/year can be considered middle class.
I'd say in SF, you need 500k to be reasonably middle/upper-middle class if you have kids (let's say 2).
1M/year is roughly 500K after taxes in Bay Area. Starter house is bad school district (means you need to pay 25K-45K per year per kid for private school) is over 1M.
Sure, but a 1M mortgage is about 50K a year at today's rates. Let's say 30K for home upkeep, 10K to keep a car on the road, 10K for utilities, 20K for food and dining.
So 500K after tax - 90K private school for two kids - 50K mortgage payment - 30K - 10K - 10K - 20K = 290K in totally disposable post-tax income. Still not even remotely close to middle class.
So 500K after tax - 90K private school for two kids - 50K mortgage payment - 30K - 10K - 10K - 20K = 290K in totally disposable post-tax income. Still not even remotely close to middle class.
sure 1M is OK in SF Bay area (you need to plan for retirement too). But even based on your calculations suddenly 500K is not enough to allow a middle class lifestyle.
A typical multiplier for house price and before tax income is 6. So you are saying a 1M house, but for 1M yearly income we should be taking about 6M house (assuming the spouse is not working). Now I definitely wouldn't call a 6M house middle class.
> The worse tax situation is always the person who makes 500k in a good year
What's the problem here? Income tax rates are moderately progressive. They'll pay a higher marginal tax rate and a moderately higher total tax rate in this year. That seems fine to me.
> or sells a house they held for 25 years which went up a bunch in value
This is what I have a problem with. This house has already had plenty of favourable tax treatment, which could include:
- Tax-deductible mortgage interest
- Gains on that property deferred for up to 25 years. To give you a comparison, zero coupon bonds don't get this favourable tax treatment;
- Possibly capped or even frozen property tax increases;
- Long-term capital gains are generally significantly lower than income taxes
Just how much tax subsidies does real estate need?
> I suspect this is a significant factor in social mobility.
Let me give you an example where this is definitely true. In Australia, pretty much every state charges stamp duty on the sale when you purchase property. It's typically in the 2-5% range. There are various exemptions and allowances for first home owners and the like (this varies from state to state).
This was all meant to go away 25 years ago when the Federal government replaced a bunch of taxes with a consumption tax (ie the GST) but it didn't happen, largely because the states were addicted to the income, which became hugely significant as property prices skyrocketed in the early 2000s.
The median price of a house in Sydney is now over A$1m. How do we expect anyone to have any kind of mobility when simply moving may result in a $50-100k+ tax?
Now the US has some of this. For example, to buy my one bedroom apartment in NYC I had to pay a "mansion tax" (that's literally what it's called) but at least it was only 1%.
My point is it could be much, much worse.
What's the problem here? Income tax rates are moderately progressive. They'll pay a higher marginal tax rate and a moderately higher total tax rate in this year. That seems fine to me.
> or sells a house they held for 25 years which went up a bunch in value
This is what I have a problem with. This house has already had plenty of favourable tax treatment, which could include:
- Tax-deductible mortgage interest
- Gains on that property deferred for up to 25 years. To give you a comparison, zero coupon bonds don't get this favourable tax treatment;
- Possibly capped or even frozen property tax increases;
- Long-term capital gains are generally significantly lower than income taxes
Just how much tax subsidies does real estate need?
> I suspect this is a significant factor in social mobility.
Let me give you an example where this is definitely true. In Australia, pretty much every state charges stamp duty on the sale when you purchase property. It's typically in the 2-5% range. There are various exemptions and allowances for first home owners and the like (this varies from state to state).
This was all meant to go away 25 years ago when the Federal government replaced a bunch of taxes with a consumption tax (ie the GST) but it didn't happen, largely because the states were addicted to the income, which became hugely significant as property prices skyrocketed in the early 2000s.
The median price of a house in Sydney is now over A$1m. How do we expect anyone to have any kind of mobility when simply moving may result in a $50-100k+ tax?
Now the US has some of this. For example, to buy my one bedroom apartment in NYC I had to pay a "mansion tax" (that's literally what it's called) but at least it was only 1%.
My point is it could be much, much worse.
The issue, if I'm understanding the OP right, is that income taxes are moderately progressive until you get to the levels where people make their living off wealth, not income. Someone earning a wage is going to pay a monotonically increasing percentage of their income as they move up the scale. That's fine. Someone who owns a holding company that itself owns 80% interests in a variety of LLCs that reinvest their profits to increase their paper valuation, and then takes out loans against the value of their holdings to pay for living expenses - could quite easily end up paying zero tax. Warren Buffett once posted that he pays half the tax rate that his secretary does (17% vs. 34% [1]), and Buffett doesn't even partake of some of the tax avoidance strategies (like taking out loans against his holdings instead of selling them outright) that many other wealthy do.
[1] https://www.forbes.com/sites/paulroderickgregory/2012/01/25/...)
[1] https://www.forbes.com/sites/paulroderickgregory/2012/01/25/...)
Here's another way to put it.
Up to a certain level you are taxed on what you EARN. Income tax is relatively progressive.
Beyond a certain point you cease to be taxed on what you earn. Instead you are taxed on what you SPEND. By this I mean, you have unrealized or non-repatriated money and you only realize those gains and pay taxes on what you need to cover your expenditure.
So if you gain $100m in a year but only spend $10m then you're only taxed on $10m and the other $90m probably grows tax free until you really need it. This might mean then that you're effectively paying a 4% total tax rate (40% of 10% of your income).
But it gets worse. Because of zero interest rates, there's no point in paying tax on that 10% either. Instead you borrow $10m at 1.5% interest secured by your unrealized gains. If your unrealized gains grow at more than your interest rate you're coming out ahead. The worst case is you're deferring your taxes for years. The best case is you're effectively deferring them forever, or at least until interest rates increase to the point where realizing the gains is cheaper than borrowing.
Up to a certain level you are taxed on what you EARN. Income tax is relatively progressive.
Beyond a certain point you cease to be taxed on what you earn. Instead you are taxed on what you SPEND. By this I mean, you have unrealized or non-repatriated money and you only realize those gains and pay taxes on what you need to cover your expenditure.
So if you gain $100m in a year but only spend $10m then you're only taxed on $10m and the other $90m probably grows tax free until you really need it. This might mean then that you're effectively paying a 4% total tax rate (40% of 10% of your income).
But it gets worse. Because of zero interest rates, there's no point in paying tax on that 10% either. Instead you borrow $10m at 1.5% interest secured by your unrealized gains. If your unrealized gains grow at more than your interest rate you're coming out ahead. The worst case is you're deferring your taxes for years. The best case is you're effectively deferring them forever, or at least until interest rates increase to the point where realizing the gains is cheaper than borrowing.
This is correct. Piketty's research has shown that as one moves to progressively higher echelons of the wealth distribution (top 5%, top 0.1%, top 0.01%), a higher and higher proportion of capital is accumulated through returns on capital rather than income. That being said, we shouldn't discount that while taxes on income are more progressive than taxes on wealth, they're still significantly less progressive than those of most other Western countries (and we have significantly higher levels of income inequality compared to those countries.)
Something people forget is the high amount of churn among millionaires in the US. It's the billionaires you're trying to go after, 500k should be ignored.
$500K? Hell, ignore net worths below $50M and pile drive into everything above that. But you will then find out just how many sub millionaires erroneously believe they are temporarily embarrassed billionaires who will fight any attempt to raise taxes on our domestic overlords just in case. Which is the way they want it...
> sub millionaires erroneously believe they are temporarily embarrassed billionaires
This is fucking spot on.
This is fucking spot on.
> Gains on that property deferred for up to 25 years.
Well yeah, before that point it hasn’t been sold, so paying taxes on unrealized gains on what the house “should” be worth is bullshit.
Well yeah, before that point it hasn’t been sold, so paying taxes on unrealized gains on what the house “should” be worth is bullshit.
I don't think you're describing an obstacle to change, you're describing the mechanism of change avoidance. Compare: "Gosh, every time we try to tax the wolves, it ends up hurting the sheep as well. Why can't our 100% wolf, 0% sheep Congress get this right? I guess it's just a hard problem!"
The solution is not to give up, the solution is to actually tax the rich more. Also, your examples are awful: paying taxes on the sale of your house is extremely rare, and the reason your hypothetical person who makes $500k in a good year pays such a high tax burden is because we tax income more heavily than capital gains, i.e. the exact opposite of a "tax targeting the ultra rich".
The solution is not to give up, the solution is to actually tax the rich more. Also, your examples are awful: paying taxes on the sale of your house is extremely rare, and the reason your hypothetical person who makes $500k in a good year pays such a high tax burden is because we tax income more heavily than capital gains, i.e. the exact opposite of a "tax targeting the ultra rich".
The problem isn't that it hurts the sheep as well, it's that it hurts the sheep almost entirely. Raising capital gains would be a decent idea that forces the rich to pay more. Basically zero support for it. Closing loopholes helps too, not what we're seeing in tax policy discussions which focus on rates instead.
Raising the top rate on income when most of the ultra-rich's money comes from investment isn't making sense. There is also little interest in creating ultra-high tax brackets. I agree in principle with someone earning $5 million/year paying a higher percentage than someone earning $1 million/year. Many countries the top rate starts at $120,000ish in local currency.
Taxes on the sale of a primary home is not as rare as you think. It may be a twice in a lifetime event for many people but if it costs you a fortune each time people are discouraged from buying starter homes and then upgrading as their family grows. Make this too expensive and people even choose to have fewer children rather than get a bigger house. People may also choose to avoid the real estate market early to wait for a realistic home and risk getting priced out entirely. Admittedly, capital gains taxes are less punitive than land transfer taxes in this regard but it's still a factor. A capped to $500K of capital gains on a primary residence of tax avoidance is useful for middle and upper middle class Americans. It's not a measure designed predominantly for the rich unless your definition of rich is so broad that it includes any property owner. We've seen what happens when you create markets where people can't move and it looks a lot like San Francisco. That's not something I'd want policies to try and replicate.
Raising the top rate on income when most of the ultra-rich's money comes from investment isn't making sense. There is also little interest in creating ultra-high tax brackets. I agree in principle with someone earning $5 million/year paying a higher percentage than someone earning $1 million/year. Many countries the top rate starts at $120,000ish in local currency.
Taxes on the sale of a primary home is not as rare as you think. It may be a twice in a lifetime event for many people but if it costs you a fortune each time people are discouraged from buying starter homes and then upgrading as their family grows. Make this too expensive and people even choose to have fewer children rather than get a bigger house. People may also choose to avoid the real estate market early to wait for a realistic home and risk getting priced out entirely. Admittedly, capital gains taxes are less punitive than land transfer taxes in this regard but it's still a factor. A capped to $500K of capital gains on a primary residence of tax avoidance is useful for middle and upper middle class Americans. It's not a measure designed predominantly for the rich unless your definition of rich is so broad that it includes any property owner. We've seen what happens when you create markets where people can't move and it looks a lot like San Francisco. That's not something I'd want policies to try and replicate.
> Basically zero support for it.
Wealth taxes are extremely well-supported, despite the media as an industry [and politicians] being owned by people strongly motivated to campaign against it all costs, e.g.:
https://www.reuters.com/article/us-usa-election-inequality-p...
Wealth taxes are extremely well-supported, despite the media as an industry [and politicians] being owned by people strongly motivated to campaign against it all costs, e.g.:
https://www.reuters.com/article/us-usa-election-inequality-p...
Wealth taxes don't work. It was tried in Europe in many countries and they ended up rolling them back.
https://en.wikipedia.org/wiki/Wealth_tax#Past_repeals
There are two studies cited. One on the repeals is by "Institut de l'Entreprise" which seems to be a wealthy people's think tank [1] and the other is about why the wealth tax wasn't introduced in the UK [2]. I'm not convinced by the evidence here.
[1] https://fr.wikipedia.org/wiki/Institut_de_l%27Entreprise
[2] http://eprints.lse.ac.uk/42582/1/Why_was_a_wealth_tax_for_th...
There are two studies cited. One on the repeals is by "Institut de l'Entreprise" which seems to be a wealthy people's think tank [1] and the other is about why the wealth tax wasn't introduced in the UK [2]. I'm not convinced by the evidence here.
[1] https://fr.wikipedia.org/wiki/Institut_de_l%27Entreprise
[2] http://eprints.lse.ac.uk/42582/1/Why_was_a_wealth_tax_for_th...
It's true that a number of European countries that previously had wealth taxes no longer do. However, European countries only collect taxes on residents. If you wanted to avoid wealth taxes you could simply move to another country (and the bar to doing so is very low in the EU...), whereas the IRS collects taxes on US citizens regardless of where they live. So the situations are not totally analogous and it's not clear that a wealth tax in the United States would also fail.
First, this is not true. I live in a country in Europe and I paid a wealth tax today, in fact.
Second, please re-read my comment above as to why you might have understood that.
Second, please re-read my comment above as to why you might have understood that.
Nothing you said contradicts what I said.
America which claims global tax jurisdiction may have slightly different results.
And yet that haven for the rich, Switzerland, has a wealth tax. Explain please?
That's interesting, can you expand?
The "idea" of wealth tax is liked, the reality is that is has never been implemented successfully. Everywhere it has been tried, it has been rolled back.
> Raising capital gains would be a decent idea that forces the rich to pay more. Basically zero support for it.
Zero support among whom, the wolves or the sheep? Taxing the rich more is generally popular[0] and this would accomplish that; it would seem like that's support.
> Taxes on the sale of a primary home is not as rare as you think.
I would need to see a source on this; I can't imagine a scenario in which any middle-class person pays any tax on their home at all, unless they live in an extreme-outlier of a neighborhood or find gold in their backyard.
0: https://money.com/wealth-tax-rich-tax-rates-2020-presidentia... for example
Zero support among whom, the wolves or the sheep? Taxing the rich more is generally popular[0] and this would accomplish that; it would seem like that's support.
> Taxes on the sale of a primary home is not as rare as you think.
I would need to see a source on this; I can't imagine a scenario in which any middle-class person pays any tax on their home at all, unless they live in an extreme-outlier of a neighborhood or find gold in their backyard.
0: https://money.com/wealth-tax-rich-tax-rates-2020-presidentia... for example
> Taxing the rich more is generally popular[0] and this would accomplish that; it would seem like that's support.
This is a circular argument. Taxing the rich is popular, but the argument is that it would hurt everyone else. Hurting everyone else is not popular.
This is a circular argument. Taxing the rich is popular, but the argument is that it would hurt everyone else. Hurting everyone else is not popular.
> I would need to see a source on this; I can't imagine a scenario in which any middle-class person pays any tax on their home at all, unless they live in an extreme-outlier of a neighborhood or find gold in their backyard.
Could you elaborate on why they wouldn't pay tax on their home?
Could you elaborate on why they wouldn't pay tax on their home?
Because there's a tax shelter for that case - see https://en.wikipedia.org/wiki/Taxpayer_Relief_Act_of_1997
Are you referring to this?
> The act permanently exempted from taxation the capital gains on the sale of a personal residence of up to $500,000 for married couples filing jointly and $250,000 for singles. This exemption applies to residences the taxpayer(s) lived in for at least two years over the last five. Taxpayers can only claim the exemption once every two years.
As I interpret the text, the middle-class homeowner will have to live in a home for two out of five years before they can claim an exemption. This matches the experience of my father, who sold his home after about four years and had to pay federal tax on the profit.
Is there something I'm missing or interpreting incorrectly?
> The act permanently exempted from taxation the capital gains on the sale of a personal residence of up to $500,000 for married couples filing jointly and $250,000 for singles. This exemption applies to residences the taxpayer(s) lived in for at least two years over the last five. Taxpayers can only claim the exemption once every two years.
As I interpret the text, the middle-class homeowner will have to live in a home for two out of five years before they can claim an exemption. This matches the experience of my father, who sold his home after about four years and had to pay federal tax on the profit.
Is there something I'm missing or interpreting incorrectly?
You are misinterpreting that part; you can claim the exemption in a house you've lived in for two years. "Two years out of the last five" means you can live in the house for two years, then move out of it (presumably because you bought another house) and rent it for up to three years, and then sell it and still claim the exemption. Even after that, you can sell it and still not pay taxes on it if you use the proceeds to purchase a different investment property (this is the "1031 exchange" that's been mentioned several times).
I don't see how our interpretations differ. You showed that there are ways for middle-class homeowners to pay the tax. Sell the house after less than five years and don't use the proceeds to purchase another house. That scenario seems to happen often enough from what I see, and it appears that the IRS will be collecting money in those cases.
> Sell the house after less than five years
You need to live there two years, not five[0].
> You showed that there are ways for middle-class homeowners to pay the tax...
I said... "on their home". If you move out of it and rent it out, it's not your home anymore, it's an investment property, which is taxed differently, as it should be. Regular people (not real estate investors or landlords, people who just own one home at a time) almost never pay taxes on a home purchase[1].
0: https://www.irs.gov/businesses/small-businesses-self-employe...
1: https://www.letmegooglethat.com/?q=do+i+need+to+pay+taxes+on...
You need to live there two years, not five[0].
> You showed that there are ways for middle-class homeowners to pay the tax...
I said... "on their home". If you move out of it and rent it out, it's not your home anymore, it's an investment property, which is taxed differently, as it should be. Regular people (not real estate investors or landlords, people who just own one home at a time) almost never pay taxes on a home purchase[1].
0: https://www.irs.gov/businesses/small-businesses-self-employe...
1: https://www.letmegooglethat.com/?q=do+i+need+to+pay+taxes+on...
> You need to live there two years, not five[0].
Thank you. That wasn't clear to me. I interpreted it as you needed to have it for five years and live in it two out of those five. Makes me wonder why my father had to pay tax when he sold his house. But then this is just by memory, he doesn't have his 1040 anymore.
Thank you. That wasn't clear to me. I interpreted it as you needed to have it for five years and live in it two out of those five. Makes me wonder why my father had to pay tax when he sold his house. But then this is just by memory, he doesn't have his 1040 anymore.
[deleted]
The problem with selling your home isn't the income tax on the gains. That would be new money you have. The problem is that the closing costs are very high and that you have to pay yearly property taxes on it whether or not you are selling it.
In NYS, you would lose 2% for selling a home in transfer tax (of the value not the gain); and then if you are financing another home 1.25% of the mortgage value. So right there you've lit 3% of the two transactions on fire. That doesn't even count the non-government fees like commissions, attorneys (for you and the bank), title insurance, etc. that eat quickly eat up many thousands of dollars.
In NYS, you would lose 2% for selling a home in transfer tax (of the value not the gain); and then if you are financing another home 1.25% of the mortgage value. So right there you've lit 3% of the two transactions on fire. That doesn't even count the non-government fees like commissions, attorneys (for you and the bank), title insurance, etc. that eat quickly eat up many thousands of dollars.
Income tax on the gains tends to be bigger than these if you hold on to a property a while in a hot market. 20% of 400,000 is much bigger than 2% of 1,000,000 if you buy at 600,000 and sell at a million for example.
I think the only thing that would solve almost all the issues is taxing the movement of money in all forms at a small rate. there have been some thoughts on it by people smarter than I but the gist is you tax money every time it moves at a tiny percentage rate. the rate is so small that for the commoners are not affected much but the people that trade money or move money off shore or buy up large commodities would be the ones that pay the most. I'm sure there are some downsides to it but there are many upsides too.
I would say in general that you want to motivate money to move as much as possible - and the problem with excessive wealth is that the money is not moving.
In an ideal world, I would tax money only when it is static.
In an ideal world, I would tax money only when it is static.
Arguably capital gains should be paid earlier so it’s a sunk cost. Being able to put it off is market-distorting. It’s hard to come up with a fair way to do it though.
Maybe a requirement to save money in advance based on market price, like payroll deductions? Then once you actually sell, you might even get a bit of a refund, encouraging turnover. But that would affect people with cash-flow problems the most.
And the biggest problem is that many people don’t want to sell and will resent any attempt to encourage it. Because encouraging turnover is equivalent to penalizing people who stay.
There is no “natural” way to do this, anything can be considered a market distortion depending on your point of view.
For large residential buildings in California, I’ve heard that apartment owners will essentially swap buildings for some kind of tax advantage. (I forgot what it was, though.)
Maybe a requirement to save money in advance based on market price, like payroll deductions? Then once you actually sell, you might even get a bit of a refund, encouraging turnover. But that would affect people with cash-flow problems the most.
And the biggest problem is that many people don’t want to sell and will resent any attempt to encourage it. Because encouraging turnover is equivalent to penalizing people who stay.
There is no “natural” way to do this, anything can be considered a market distortion depending on your point of view.
For large residential buildings in California, I’ve heard that apartment owners will essentially swap buildings for some kind of tax advantage. (I forgot what it was, though.)
I think being able to put off capital gains on assets like homes and start-up stock is necessary for the tax system to not do awful things like force people to sell a home because it becomes too valuable or bankrupt someone who has stock options in a company that reaches a high valuation but has untraceable stock.
We consider these awful because of tradition.
The land tax advocates would say that people who own valuable real estate should sell, they are hoarding valuable property.
My scheme (which I’m not too serious about) would not force bankruptcy in the stock options scenario because you could give up some stock options to get your money back. Or possibly get a very low interest loan since it would be fully collateralized by the forced savings.
The land tax advocates would say that people who own valuable real estate should sell, they are hoarding valuable property.
My scheme (which I’m not too serious about) would not force bankruptcy in the stock options scenario because you could give up some stock options to get your money back. Or possibly get a very low interest loan since it would be fully collateralized by the forced savings.
> For large residential buildings in California, I’ve heard that apartment owners will essentially swap buildings for some kind of tax advantage.
You might be thinking of the federal-level 1031 exchange [1]. California’s particularly distortive Prop. 13-based market has led to a separate Prop. 60 tax base exchange mechanism that might also fit what you saw [2].
[1] https://www.investopedia.com/financial-edge/0110/10-things-t...
[2] https://www.bosinvest.com/blog/tax-planning/dreaming-of-down...
You might be thinking of the federal-level 1031 exchange [1]. California’s particularly distortive Prop. 13-based market has led to a separate Prop. 60 tax base exchange mechanism that might also fit what you saw [2].
[1] https://www.investopedia.com/financial-edge/0110/10-things-t...
[2] https://www.bosinvest.com/blog/tax-planning/dreaming-of-down...
No. The solution is for government to spend LESS. There is no amount of tax that can out earn Congress’ appetite for pork, kickbacks, and voter bribery through wealth transfer.
The only reason we are told to see the illiquid wealth of billionaires as a problem is the lie that Congress can spend that money better.
They cannot.
The only reason we are told to see the illiquid wealth of billionaires as a problem is the lie that Congress can spend that money better.
They cannot.
If a person makes $500k in a good year, they will get hit with higher taxes, but they're probably going to invest a lot in order to hedge against not so good years. Taxing their capital gains is a double whammy.
Just imagine Income Tax + Sales Tax... get taxed on what you earn, then taxed again when you go to spend it!
This is a clever way to reduce purchasing power without making it seem as bad, ie. nobody really considers the tax on a new car purchase until they're signing the final paperwork... or even on a new T-Shirt. Depending where yo live, this sales tax is non-trivial too, sometimes up to 10%+.
This is a clever way to reduce purchasing power without making it seem as bad, ie. nobody really considers the tax on a new car purchase until they're signing the final paperwork... or even on a new T-Shirt. Depending where yo live, this sales tax is non-trivial too, sometimes up to 10%+.
Sales tax is the most visible tax. Maybe the richest of rich people do not consider it, but I have a hard time believing "nobody" considers it.
Do you add up in your head how much that fast food meal will actually cost before you order it? How about when you try on new shoes? Probably not...
Yes, it is trivial to add 10% (or 30% for waited restaurants) to a number. Even if people did not for small purchases, with so many people living paycheck to paycheck, surely they notice an extra $50 to $150 for a TV or $3,000 for a car.
One of Amazon and other online only retailers’ biggest advantages until 2018 was that it did not have to charge sales tax to people in states without a physical Amazon presence. That meant you saved 7% or more buying from Amazon instead of locally. Basically everyone I know used to buy online to skirt sales tax.
https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc.
It was a very big deal and politicians had been complaining about waning sales tax revenues.
One of Amazon and other online only retailers’ biggest advantages until 2018 was that it did not have to charge sales tax to people in states without a physical Amazon presence. That meant you saved 7% or more buying from Amazon instead of locally. Basically everyone I know used to buy online to skirt sales tax.
https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc.
It was a very big deal and politicians had been complaining about waning sales tax revenues.
If the tax is on the gains it's still a single whammy.
And it will never change!
Taking things requires force. Force only works against the powerless. That’s tautological.
And also tautologically, if you’re benefitting from the use of force, it’s because you are powerful, and you are exploiting the powerless. I don’t care how poor or oppressed you think you are.
Taking things requires force. Force only works against the powerless. That’s tautological.
And also tautologically, if you’re benefitting from the use of force, it’s because you are powerful, and you are exploiting the powerless. I don’t care how poor or oppressed you think you are.
Every single time someone tries to make a tax targeting the ultra rich, someone writes a comment just like this. Every. Single. Time.
As far as I can tell, this comment is semantically identical to:
"Every time someone tries a new cancer therapy, it ends up not helping the worst cancers."
"The sting operation was a failure because it only caught low- and mid-level criminals."
"We shouldn't use automated tests because some bugs cannot be caught by it."
"Look, this bully is ten times stronger than my kid. He's gonna beat him up whether my kid wants him too or not. We should just accept that the kid is gonna get pummelled."
There are at least four flaws I can see:
1. The obvious "perfect is the enemy of the good" argument. Unless you have an alternative proposed tax that is flawless, then the comment does not get closer to a world where people pay a share of taxes commensurate with their point on the wealth continuum.
2. By framing it as "hurting" the moderately wealthy, it applies a narrative that taxes exist to punish, that the extremely wealthy deserve that morally, and that the moderately wealthy do not. Every piece of that narrative is wrong. Taxes exist to fund services, not enforce moral orders. It's not like we have a higher tax rate for convicted criminals. The moderately wealthy also have a capacity to afford taxes higher taxes without lowering their quality of life, so a tax law that hits them too has not "failed". Even if taxes were punishment, this comment presents no actual evidence that the moderately wealthy are morally purer than the ultra-wealthy.
3. Some fraction of today's moderately wealthy are tomorrow's obscenely wealthy, so applying some tax pressure on them today is a step towards preventing them from escaping that tax burden tomorrow.
4. Equating people who make 500k in a year with "the working class" is... I don't even know what to say about it.
5. Forcing the ultra-rich to do extra work to dodge this new law is a net good. Defeatism, which seems to be the counter-proposal here, makes it even easier for them to retain and acquire wealth. We should keep passing laws. Every time they find a loophole, close it. Vote out politicians that get bought. Make them keep jumping. Wear the fuckers out because eventually some will lose if you keep trying. If you let them win... well you let them win.
As far as I can tell, this comment is semantically identical to:
"Every time someone tries a new cancer therapy, it ends up not helping the worst cancers."
"The sting operation was a failure because it only caught low- and mid-level criminals."
"We shouldn't use automated tests because some bugs cannot be caught by it."
"Look, this bully is ten times stronger than my kid. He's gonna beat him up whether my kid wants him too or not. We should just accept that the kid is gonna get pummelled."
There are at least four flaws I can see:
1. The obvious "perfect is the enemy of the good" argument. Unless you have an alternative proposed tax that is flawless, then the comment does not get closer to a world where people pay a share of taxes commensurate with their point on the wealth continuum.
2. By framing it as "hurting" the moderately wealthy, it applies a narrative that taxes exist to punish, that the extremely wealthy deserve that morally, and that the moderately wealthy do not. Every piece of that narrative is wrong. Taxes exist to fund services, not enforce moral orders. It's not like we have a higher tax rate for convicted criminals. The moderately wealthy also have a capacity to afford taxes higher taxes without lowering their quality of life, so a tax law that hits them too has not "failed". Even if taxes were punishment, this comment presents no actual evidence that the moderately wealthy are morally purer than the ultra-wealthy.
3. Some fraction of today's moderately wealthy are tomorrow's obscenely wealthy, so applying some tax pressure on them today is a step towards preventing them from escaping that tax burden tomorrow.
4. Equating people who make 500k in a year with "the working class" is... I don't even know what to say about it.
5. Forcing the ultra-rich to do extra work to dodge this new law is a net good. Defeatism, which seems to be the counter-proposal here, makes it even easier for them to retain and acquire wealth. We should keep passing laws. Every time they find a loophole, close it. Vote out politicians that get bought. Make them keep jumping. Wear the fuckers out because eventually some will lose if you keep trying. If you let them win... well you let them win.
Maybe you should focus on how you would avail the failures of past attempts:
https://www.npr.org/sections/money/2019/02/26/698057356/if-a...
>In 1990, twelve countries in Europe had a wealth tax. Today, there are only three
>France's wealth tax contributed to the exodus of an estimated 42,000 millionaires between 2000 and 2012, among other problems. Only last year, French president Emmanuel Macron killed it.
https://www.npr.org/sections/money/2019/02/26/698057356/if-a...
>In 1990, twelve countries in Europe had a wealth tax. Today, there are only three
>France's wealth tax contributed to the exodus of an estimated 42,000 millionaires between 2000 and 2012, among other problems. Only last year, French president Emmanuel Macron killed it.
> In 1990, twelve countries in Europe had a wealth tax. Today, there are only three
The "Today,..." claim is is simply false (both when the article was written, and now).
Wikipedia lists examples including six countries in Europe. Belgium is listed, which created a wealth tax in 2018 - why is that missing from this article of 2019?
Tax regimes in Europe change frequently according to the political situation, so this presents little evidence as to whether any individual tax "worked" anyway. But, this claim is just badly researched (generously speaking).
The "Today,..." claim is is simply false (both when the article was written, and now).
Wikipedia lists examples including six countries in Europe. Belgium is listed, which created a wealth tax in 2018 - why is that missing from this article of 2019?
Tax regimes in Europe change frequently according to the political situation, so this presents little evidence as to whether any individual tax "worked" anyway. But, this claim is just badly researched (generously speaking).
I guess I could focus on it by simply quoting the article farther down?
> UC Berkeley economist Gabriel Zucman, whose research helped put wealth inequality back on the American policy agenda, played a part in designing Warren's wealth tax. He says it was designed explicitly with European failures in mind.
> He argues the Warren plan is "very different than any wealth tax that has existed anywhere in the world." Unlike in the European Union, it's impossible to freely move to another country or state to escape national taxes. Existing U.S. law also taxes citizens wherever they are, so even if they do sail to a tax haven in the Caribbean, they're still on the hook. On top of that, Warren's plan includes an "exit tax," which would confiscate 40 percent of all a person's wealth over $50 million if they renounce their citizenship.
> Warren's tax is also only limited to the super rich, whereas in Europe the threshold was low enough to also hit the sort-of rich. This higher threshold helps it avoid problems like someone having a family business that makes them look rich on paper but, in fact, they're short on the cash needed to pay the tax.
> Also important, Zucman argues, the higher threshold means only a small group will be affected. And smaller groups have a harder time fighting for exemptions, which hurt European efforts. Some countries, for example, exempted artwork and antiques on the grounds they were hard to value. It's true, but it creates a huge loophole: Buy lots of art! Economists hate incentives like these because they distort markets. Warren's proposal calls for no exemptions.
> UC Berkeley economist Gabriel Zucman, whose research helped put wealth inequality back on the American policy agenda, played a part in designing Warren's wealth tax. He says it was designed explicitly with European failures in mind.
> He argues the Warren plan is "very different than any wealth tax that has existed anywhere in the world." Unlike in the European Union, it's impossible to freely move to another country or state to escape national taxes. Existing U.S. law also taxes citizens wherever they are, so even if they do sail to a tax haven in the Caribbean, they're still on the hook. On top of that, Warren's plan includes an "exit tax," which would confiscate 40 percent of all a person's wealth over $50 million if they renounce their citizenship.
> Warren's tax is also only limited to the super rich, whereas in Europe the threshold was low enough to also hit the sort-of rich. This higher threshold helps it avoid problems like someone having a family business that makes them look rich on paper but, in fact, they're short on the cash needed to pay the tax.
> Also important, Zucman argues, the higher threshold means only a small group will be affected. And smaller groups have a harder time fighting for exemptions, which hurt European efforts. Some countries, for example, exempted artwork and antiques on the grounds they were hard to value. It's true, but it creates a huge loophole: Buy lots of art! Economists hate incentives like these because they distort markets. Warren's proposal calls for no exemptions.
[deleted]
Very good point! I thought the same thing about the original comment, but you actually analyze the entire thing improved why it is incorrect. Thank you!
You are right, but if they crafted the right bill, I think we could tax the ultra rich, without affecting the asset rich widow, or the moderately wealthy.
Give everyone one big tax day on a house. The family that bought a ranch style house years ago is allowed 1 huge tax holiday. That married $500k deduction is a joke, and needs to be increased.
So, the widow living in the ranch style house should be exempt from taxes, say up to 3M, if she decides to move. With that money, she could move anywhere, and not worry about property taxes too? I know you guys don't like prop 13. (Only about 4-5 counties in CA that will accept a recriprovial property tax transfer. Keep that in mind if older, and looking to move.)
Let's face it, most Americans will only see one big pay day over an asset, and it's usually the family home.
My point is only allow the tax holiday 1 time, and it would be for individuals whom make less than $500k/yr. Don't allow the tax dodge to go on forever, and abused by every ultra rich guy forever.
Let Elisabeth Warren right the bill, and I would bet the lucky middle class 1 home asset person would not be affected by a wealth tax? Warren is wealthy. She is not ultrarich. She knows the difference.
Give everyone one big tax day on a house. The family that bought a ranch style house years ago is allowed 1 huge tax holiday. That married $500k deduction is a joke, and needs to be increased.
So, the widow living in the ranch style house should be exempt from taxes, say up to 3M, if she decides to move. With that money, she could move anywhere, and not worry about property taxes too? I know you guys don't like prop 13. (Only about 4-5 counties in CA that will accept a recriprovial property tax transfer. Keep that in mind if older, and looking to move.)
Let's face it, most Americans will only see one big pay day over an asset, and it's usually the family home.
My point is only allow the tax holiday 1 time, and it would be for individuals whom make less than $500k/yr. Don't allow the tax dodge to go on forever, and abused by every ultra rich guy forever.
Let Elisabeth Warren right the bill, and I would bet the lucky middle class 1 home asset person would not be affected by a wealth tax? Warren is wealthy. She is not ultrarich. She knows the difference.
My giving a shit about household capital gains went away when a partisan congress decided to buy redneck votes with punitive SALT rollback.
SALT deductions are a massive tax break for the wealthy. Your own partisanship that would see them restored is just as powerful, and the tax policy you advocate here is more regressive.
> SALT deductions are a massive tax break for the wealthy.
How?
The point of being able to deduct state and local taxes from federal ones is to devolve power to as local a level of government as possible. You've already paid the local authorities some taxes, so now you owe the federal government less.
SALT limits do the opposite of that.
How?
The point of being able to deduct state and local taxes from federal ones is to devolve power to as local a level of government as possible. You've already paid the local authorities some taxes, so now you owe the federal government less.
SALT limits do the opposite of that.
SALT is a tax break for the rich because state and local taxes are progressive, the rich pay more per dollar earned, and the rich are much less likely to be taking the standard deduction.
And when a state like New York or California decides to raises income taxes, it should not be understood that they are strengthening their participation in any power devolution scheme. It could work that way, but it doesn't. The Feds do not generally delegate their services like that.
And when a state like New York or California decides to raises income taxes, it should not be understood that they are strengthening their participation in any power devolution scheme. It could work that way, but it doesn't. The Feds do not generally delegate their services like that.
When I bought my home in 2008, I made $80k, and mortgage + taxes allowed me to itemize my charitable and some work expenses. It was not a ton of money, but helped with the community work that I do.
I wasn’t exactly living in the gutter, but would say I was “rich”.
I wasn’t exactly living in the gutter, but would say I was “rich”.
> the rich are much less likely to be taking the standard deduction.
Not sure what that has to do with SALT deductions. My understanding is they were on top of the standard deduction, not as an additional line on itemized deductions.
Not sure what that has to do with SALT deductions. My understanding is they were on top of the standard deduction, not as an additional line on itemized deductions.
Why should 2 people with the same income, who get the same services for the federal government pay different federal tax rates? That's what SALT does, and it should have been eliminated entirely.
I live in New York, which has a net outflow of Federal revenues that makes life in many states possible. Most of the states impacted have outflows like that.
So frankly, I think it’s fair for some Midwest farmer with land left barely fertile due to mono cropping to pay the full shot of capital gains on his farm, after all, the farm would be worthless without federal price supports, irrigation, levee systems, and direct payments for the corn. Likewise, the Floridian using the homestead laws to launder money in property should be paying the full shot on the Miami condo.
When demographics starts shifting the congress in a few years, I’m sure similar scorched earth policy will happen, which sucks, becuase it will utterly destroy whatever rural economy exists in these states.
So frankly, I think it’s fair for some Midwest farmer with land left barely fertile due to mono cropping to pay the full shot of capital gains on his farm, after all, the farm would be worthless without federal price supports, irrigation, levee systems, and direct payments for the corn. Likewise, the Floridian using the homestead laws to launder money in property should be paying the full shot on the Miami condo.
When demographics starts shifting the congress in a few years, I’m sure similar scorched earth policy will happen, which sucks, becuase it will utterly destroy whatever rural economy exists in these states.
2 people with the same income get different benefits, if one lives in a red state, and the other in a blue state. The red state is a net recipient of federal funding, the blue state is a net provider. Most red state economies would implode without this fire-hose of free money. Texas or Florida might be okay, the rest, not so much.
The same thing plays out on the state level. Eastern Washington loves to complain about taxes, and I would love nothing more than to let it have its wish... As long as Western Washington can stop subsidizing it.
The same thing plays out on the state level. Eastern Washington loves to complain about taxes, and I would love nothing more than to let it have its wish... As long as Western Washington can stop subsidizing it.
That's the ultimate appeal of a wealth tax. Taxing a hundred millionaire, or billionaire, or even a 10 billionaire a progressive 4% annual tax won't affect someone making good money off of income in nearly every scenario.
I agree! All taxes should be wealth taxes. Or to be more clear - the only tax we have should be one wealth tax that is a single percentage and affects everyone at all levels equally. Maybe 3% per year or something.
A house someone held for 25 years, fundamentally, doesn't seem any different than stocks someone held for 25 years. I'm not sure why we're obsessed with the idea that non-homeowners should subsidize homeowner's housing.
If we really claim to live in a progressive society, shouldn't renters be getting the subsidy? I mean, sure, a small percentage of the population does have public housing. But that hardly compares to the amount of people saving $10k per year on taxes with the mortgage interest deduction on ~$1M homes in HCOL areas, and then another 15-20% on $250k ($37.5k-$50k) when they sell it.
This is more than the average household makes per year after taxes...
The long-term average for appreciation on housing is 2.75%. In the last 20 years, it's been well above that. But even still, the average home-owner with a $1M house is saving $20k+ in taxes per year.
I mean - I get it. The average person buying a million dollar home these days probably has a marginal tax rate of >40%, and houses are wicked expensive. It's nice to save some taxes. But is this really the group that should be getting the savings? And isn't it possible all this is just manipulating the housing market further?
I'm not sure about everyone else, but I'd rather my home be a place where I live than a meme-stock I speculate on.
If we really claim to live in a progressive society, shouldn't renters be getting the subsidy? I mean, sure, a small percentage of the population does have public housing. But that hardly compares to the amount of people saving $10k per year on taxes with the mortgage interest deduction on ~$1M homes in HCOL areas, and then another 15-20% on $250k ($37.5k-$50k) when they sell it.
This is more than the average household makes per year after taxes...
The long-term average for appreciation on housing is 2.75%. In the last 20 years, it's been well above that. But even still, the average home-owner with a $1M house is saving $20k+ in taxes per year.
I mean - I get it. The average person buying a million dollar home these days probably has a marginal tax rate of >40%, and houses are wicked expensive. It's nice to save some taxes. But is this really the group that should be getting the savings? And isn't it possible all this is just manipulating the housing market further?
I'm not sure about everyone else, but I'd rather my home be a place where I live than a meme-stock I speculate on.
Housing benefits need adjustment so a larger share goes toward people who need it more, but overall home ownership encourages people to raise families and build communities, which acts as a compounding benefit to society. i.e. subsidizing renters will have a positive short term benefit, but long term it benefits landlords.
> Every time someone tries to make a tax targeting the ultra rich, it ends up hurting the moderately wealthy instead.Every. Single. Time.
Get back to me when there is a good faith effort to raise the capital gains tax and/or institute a wealth tax instead of pretending that that "ultra rich" people derive their wealth from employment income.
Get back to me when there is a good faith effort to raise the capital gains tax and/or institute a wealth tax instead of pretending that that "ultra rich" people derive their wealth from employment income.
Nothing like a barrier to entry to the top 1% to keep out the rabble! But yes, you've discovered the crab pot cheat code that will continue to keep things exactly where they've been and they will remain. Go ahead and propose a 1% tax on wealth beyond $50M. Even make sales to pay that tax 100% tax-deductible. It won't happen. Or how about a 50% inheritance tax on wealth beyond $100M? You're not getting that either when there's a sweet middle to upper middle class pile of Quatloos to mine and they don't have enough money to hire the right people to make that problem go away.
But I'm starting to think they need their own PAC and they could afford that.
But I'm starting to think they need their own PAC and they could afford that.
> Every time someone tries to make a tax targeting the ultra rich, it ends up hurting the moderately wealthy instead.
Governments around the tax the middle class, because that's where the money is. Our current spending campaign will result in substantial tax increases for the middle class; the only real questions are when, and how much (less if it's sooner, more if it's later).
Governments around the tax the middle class, because that's where the money is. Our current spending campaign will result in substantial tax increases for the middle class; the only real questions are when, and how much (less if it's sooner, more if it's later).
> because that's where the money is.
Except that its not. Did you actually read the article?
Except that its not. Did you actually read the article?
Did you read the HN community guidelines?
Wait, I thought the first 250-500K home sale profit was not capital gain taxed in the US?
https://www.investopedia.com/ask/answers/06/capitalgainhomes...
https://www.investopedia.com/ask/answers/06/capitalgainhomes...
This post should be marked as dup
Would be curious to see twitter blocking this story on the basis that this is the distribution of stolen data as they did last year...
Twitter only does that when it facilitates manipulation of important elections. They’ve moved on to protecting Fauci, Harris, Biden from the harsh reality of their own incompetence and rapidly vanishing facade of legitimacy.
[deleted]
The top 1% contribute 38.5% of Federal income tax revenue.
Two questions:
1. How much of the wealth (and/or income) do they have?
2. If they paid their taxes like the rest of the population, what would this number be?
1. How much of the wealth (and/or income) do they have?
2. If they paid their taxes like the rest of the population, what would this number be?
1. We don't know. Wealth is not taxable. Income is taxed.
2. They already pay according to the same rules as everyone else.
2. They already pay according to the same rules as everyone else.
the top 1% own 31% of all the net wealth in the US, which isn't the same as income - but gives a good idea of how disproportionate their share is
38.5% seems too low
https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr...
38.5% seems too low
https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr...
People creating wealth are not taking it from others. Wealth is not zero sum.
No, the top 1% of earners contribute that. Wealthy people don't have earned income. If you go to work, even as a ceo, even in the top 1% of earners, you're not wealthy.
> Many will ask about the ethics of publishing such private data. We are doing so — quite selectively and carefully — because we believe it serves the public interest in fundamental ways, allowing readers to see patterns that were until now hidden.... We believe that disclosing the identities of billionaires who paid little to no taxes in years their fortunes grew by billions of dollars will help readers understand the magnitude of the tax advantages the ultrarich enjoy... Our publication of this tax data comes at a possibly pivotal moment in America’s long, often contentious debate about the fairness of our tax system
So it's okay to encroach on the privacy of private individuals as long as it serves a political purpose? To try to drum up support for higher tax rates? They're not even saying these individuals used their money to manipulate the tax code, but are merely beneficiaries of income with preferable tax treatment.
So it's okay to encroach on the privacy of private individuals as long as it serves a political purpose? To try to drum up support for higher tax rates? They're not even saying these individuals used their money to manipulate the tax code, but are merely beneficiaries of income with preferable tax treatment.
How you feel about this is going to depend on where you are on the political spectrum. I fully support this decision based on where the country stands on inequality and socioeconomic power imbalances. It’s in the public interest to demonstrate the result of poorly constructed public policy (and thereby stoke inertia to fix it and erode wealth inequality).
I’m happy to make my tax returns and income history public if the wealthy are required to do the same.
I’m happy to make my tax returns and income history public if the wealthy are required to do the same.
So if someone wanted to demonstrate poor building codes by setting your house on fire, that would be okay too, since you know, it's in the public interest to demonstrate lax building codes?
Privacy is a right that I would think more people on this forum would respect. I don't see why you're so happy to offer up the rights of others as sacrificial lambs to make some political point.
Privacy is a right that I would think more people on this forum would respect. I don't see why you're so happy to offer up the rights of others as sacrificial lambs to make some political point.
A better analogy would be breaking and entering to collect evidence that a building was unsafe for occupancy, and I’d support that as well under the assumption that due process had failed and there was risk to those marginalized.
I don’t believe there is an absolute right to privacy. As always, there’s nuance.
I don’t believe there is an absolute right to privacy. As always, there’s nuance.
Does this hypothesize the lack of a functioning court system to issue a search warrant, the lack of observing the Fourth Amendment in the US (or equivalent in many other countries), or both?
No hard and fast rules. Like obscenity, a reasonable person believes the situation warrants it when they see it.
So evidence obtained illegally outside of due-process is fair game in your book?
I guess by saying "when due process failed" kind of makes it so since by definition it "failed".
I guess by saying "when due process failed" kind of makes it so since by definition it "failed".
>So evidence obtained illegally outside of due-process is fair game in your book?
So evidence of horrible crimes should be ignored if subjective "due-process" isn't followed? You do realize that the moneyed elite have disproportionate influence over "process" and law, right?
Focus on the leaks and whether they are true, not the messenger.
So evidence of horrible crimes should be ignored if subjective "due-process" isn't followed? You do realize that the moneyed elite have disproportionate influence over "process" and law, right?
Focus on the leaks and whether they are true, not the messenger.
The "horrible crimes" of following the applicable tax laws. Got it.
I'm not focusing on the messenger. I'm questioning the ethics to violate the privacy of private individuals to try to score political points.
I'm not focusing on the messenger. I'm questioning the ethics to violate the privacy of private individuals to try to score political points.
You're not advocating for modeling our actions, social interactions, behaviours, and relationships after our criminal justice system, right? Also you're not advocating for an equivalentcy between judicial evidenciary procedure and information gathering, and judicial due process and social due process, right?
If you purposely set it on fire, thats arson. But actually yes, in many cases accidents are catalyst needed to make change happen for the benefit of the public.
A dangerous intersection gets a traffic light after a horrible car crash.
A dangerous building design code gets corrected after the doors wont open outward during a fire.
Problems need to first come to light to be fixed.
A dangerous intersection gets a traffic light after a horrible car crash.
A dangerous building design code gets corrected after the doors wont open outward during a fire.
Problems need to first come to light to be fixed.
What? That house burning example is absurd and bad logic
> So if someone wanted to demonstrate poor building codes by setting your house on fire, that would be okay too, since you know, it's in the public interest to demonstrate lax building codes?
Yes, of course destroying property and incurring expenses for the local government is exactly the same as releasing records... oh no wait - its not at all the same.
Yes, of course destroying property and incurring expenses for the local government is exactly the same as releasing records... oh no wait - its not at all the same.
They are not private individuals. They are individuals that are of public interest (much like celebrities) and hold significant sway over communities (much like public officials). This is pretty standard legal precedent.
So privacy is only for those that aren't celebrities? Do you have some barometer for what makes a "celebrity"? Blue check mark?
Right to privacy is a human right. Do you agree? If so, are there classes of human rights that aren't applicable to some groups of individuals?
Right to privacy is a human right. Do you agree? If so, are there classes of human rights that aren't applicable to some groups of individuals?
It's actually very simple. If a year from now you find that the authors (Engelberg and Tofel, others?) of this project are still free then everyone whose data they published was a legit "celebrity" and the leak was OK with the current administration. If you suddenly discover that all of ProPublica are actually sex offenders and evade justice by hiding out in embassies (or something similar) then they overreached and leaked the wrong data on an off-limits "non-celebrity". Makes sense.
Courts exist for this reason. On one hand, you have the right to privacy (though it is not spelled out that clearly, it is inferred).
On the other, you have freedom of the press clearly outlined in the first amendment. There is no perfect answer and it will be subject to some debate. But in this particular instance, precedence has made it clear that people of significant stature (and that could mean a blue check is a signal of that in court!) have less of a right to privacy when weighed against the first amendment.
On the other, you have freedom of the press clearly outlined in the first amendment. There is no perfect answer and it will be subject to some debate. But in this particular instance, precedence has made it clear that people of significant stature (and that could mean a blue check is a signal of that in court!) have less of a right to privacy when weighed against the first amendment.
Unfortunately you are speaking of ideals. In reality a person's right to privacy is dependent on many factors including their country, race, etc.
With regards to celebrity, there is absolutely a tradeoff. On paper celebrities have the same civil rights as anyone else, but e.g. have you heard of the paparazzi before?
With regards to celebrity, there is absolutely a tradeoff. On paper celebrities have the same civil rights as anyone else, but e.g. have you heard of the paparazzi before?
> Unfortunately you are speaking of ideals. In reality a person's right to privacy is dependent on many factors including their country, race, etc.
I disagree. A right is a human right. Human rights are not granted by a country, they can only be violated. My right to free thought and expression doesn't cease being a right if I'm in an oppressive state. A state can violate my rights but human rights are universal. You can disagree that privacy is a human right, and that's fine if you do.
In regards to paparazzi, if you're in a public space, you don't have the same right. It's balance by the right of another person taking photos in that same public space. There is no expectation of privacy, so I'm free to snap your picture, same as I have a right to record a police interaction (despite what some legislation might have you believe). But that doesn't mean I have the right to break into your home and record you sleeping.
I disagree. A right is a human right. Human rights are not granted by a country, they can only be violated. My right to free thought and expression doesn't cease being a right if I'm in an oppressive state. A state can violate my rights but human rights are universal. You can disagree that privacy is a human right, and that's fine if you do.
In regards to paparazzi, if you're in a public space, you don't have the same right. It's balance by the right of another person taking photos in that same public space. There is no expectation of privacy, so I'm free to snap your picture, same as I have a right to record a police interaction (despite what some legislation might have you believe). But that doesn't mean I have the right to break into your home and record you sleeping.
I didn’t disagree. I said it’s an ideal.
Do you seriously think the experience is the same in public between an average citizen and a celebrity? There is a huge trade off that a celebrity accepts when becoming a household name/face.
Do you seriously think the experience is the same in public between an average citizen and a celebrity? There is a huge trade off that a celebrity accepts when becoming a household name/face.
> Right to privacy is a human right. Do you agree? If so, are there classes of human rights that aren't applicable to some groups of individuals?
Yes, but right to extreme wealth isn't. I don't think people should be able to control this amount of wealth at all, but while they can I think public scrutiny over their finances is entirely reasonable.
Yes, but right to extreme wealth isn't. I don't think people should be able to control this amount of wealth at all, but while they can I think public scrutiny over their finances is entirely reasonable.
Hi, exotree, I have declared you to be of interest to the public. What's your annual take-home pay?
And the .001 consistently encroach on our political policies for private benefit.
I see these tax loopholes as bugs/vulnerabilities in the tax code. And just like in software, bad actors have an incentive to keep the bugs in place.
Shedding light on them is a first step towards greater awareness and eventual fixes.
I see these tax loopholes as bugs/vulnerabilities in the tax code. And just like in software, bad actors have an incentive to keep the bugs in place.
Shedding light on them is a first step towards greater awareness and eventual fixes.
> Taxes aren't and shouldn't be secret.
Cool. Would you mind sending me your tax returns (assuming you're in the US), or similar income history?
You can oppose tax loopholes without encroaching on the privacy of others. To use your example, imagine dumping hacked Facebook user data because you don't like bugs in Facebook software
Cool. Would you mind sending me your tax returns (assuming you're in the US), or similar income history?
You can oppose tax loopholes without encroaching on the privacy of others. To use your example, imagine dumping hacked Facebook user data because you don't like bugs in Facebook software
That's an unfair response. It's reasonable to want the rules to change for society and be willing to play along. That's different from wanting to be the only one to do it.
[deleted]
> Imagine dumping hacked facebook user data because you don’t like bugs in Facebook software
No need for imagination here... This happens all the time. Data leaks are a regular outcome from security bugs/breeches.
No need for imagination here... This happens all the time. Data leaks are a regular outcome from security bugs/breeches.
And it's just as unethical in that case as well
Are you suggesting that the top “earners” who manipulate their taxes are acting ethically?
These people deserve (and can afford) every ounce of scrutiny they receive.
These people deserve (and can afford) every ounce of scrutiny they receive.
Suppose I like to donate to nonprofits supporting political dissidents of another nation and that makes me an assassination target, or hell political or adjacent orgs in this country (BLM, PP, NRA) and that makes me a harassment target
What's the argument in keeping it secret? Politicians routinely (Trump notably being the exception) release these all the time.
The bad actors with the most incentive to keep the bugs in place are the same people that put the bugs into the system: lawmakers. They might occasionally close a bug, but they are not interested in preventing them being introduced. They sell these bugs/vulnerabilities. That's the business they are in.
Ah yes, an eye for an eye.
They obviously considered the ethics of this and decided to share for “the public interest” and not “a political purpose” as you say. What politicians do with this information is another matter. They’re simply telling the story like journalists are supposed to do!
Labeling something a "True Tax Rate" (paid taxes / wealth increase) isn't journalism, it's advocacy.
Good point. I guess I see the advantages of the ultra rich as something that shouldn’t be politicized. That’s some bullshit that all stripes of political belief should agree on and change. Like, who wouldn’t advocate for that? (Besides the ultra rich. And please don’t say those who aspire to be ultra rich, because that’s not a realistic argument/that idea should die)
Edit: Can you explain why the phrase “true tax rate” is considered political advocacy?
Edit: Can you explain why the phrase “true tax rate” is considered political advocacy?
Jonnax(2)
> quite selectively and carefully
> allowing readers to see patterns that were until now hidden
am I being too cynical, or is this a "pick one" situation? what "pattern" are the readers supposed to see in this carefully chosen subset of the data? what patterns do the unchosen subsets show?
> allowing readers to see patterns that were until now hidden
am I being too cynical, or is this a "pick one" situation? what "pattern" are the readers supposed to see in this carefully chosen subset of the data? what patterns do the unchosen subsets show?
This is where trust comes in. Most people need a narrative and a story to follow the threads; they are not experts in determining what the data does or does not tell us, and someone has to attempt to do so.
I'd give ProPublica the benefit the doubt here. They have the resources to hire the right talent, and that talent is likely empowered to keep conjecture at bay or properly disclosed.
And, of course, you're unlikely to get all the data. Stories like this will nearly always, in some form or fashion, be based on a somewhat incomplete snapshot of data or documents. But taking that data and corroborating it with what we do know is often enough to add validity to the assumptions that are being reached by a publication such as ProPublica.
I'd give ProPublica the benefit the doubt here. They have the resources to hire the right talent, and that talent is likely empowered to keep conjecture at bay or properly disclosed.
And, of course, you're unlikely to get all the data. Stories like this will nearly always, in some form or fashion, be based on a somewhat incomplete snapshot of data or documents. But taking that data and corroborating it with what we do know is often enough to add validity to the assumptions that are being reached by a publication such as ProPublica.
Let's talk about the actual damage that could occur to an individual here. The fact of the matter is, billionaires are effectively isolated from all societal repercussions, where the average person simply isn't. Even if you waved a magic wand, and prevented them from making any money through any mechanism, and they just had spend their wealth, their lifestyle would not change at all. They literally can not spend the amount of money they have, in the years of life they have remaining. Even the threat of jail time isn't a real threat, given the serious discrepancies in prosecution and sentencing guidelines, let alone the plausibility of someone pulling a Carlos Ghosn[0], which is much easier to do when you effectively have infinite resources.
Now let's look at the other side. The societal benefit is making these effects current preferential policies concrete. Often politicians and other supporters of the super wealthy intentionally muddy the waters by talking about "small businesses", "family farms", and other middle class and upper middle class lifestyles. (e.g. The arguments made by against inheritance tax, that only affects net worths in excess of $11.7 million, or the arguments based on absolute dollar amounts rather than income or wealth percentages.) By making the effects concrete rather than abstract, it's much harder to argue that there is any sort of negative individual effects on ultra wealthy.[1]
[0] https://www.bbc.com/news/world-50964040
[1] For example: Even if you took half of Warren Buffet's wealth ($110 B) every year for the rest of his life (90 years old, today), he'd probably still die a billionaire. And even if he lived to be a 100, he'd still have $100 million.
Now let's look at the other side. The societal benefit is making these effects current preferential policies concrete. Often politicians and other supporters of the super wealthy intentionally muddy the waters by talking about "small businesses", "family farms", and other middle class and upper middle class lifestyles. (e.g. The arguments made by against inheritance tax, that only affects net worths in excess of $11.7 million, or the arguments based on absolute dollar amounts rather than income or wealth percentages.) By making the effects concrete rather than abstract, it's much harder to argue that there is any sort of negative individual effects on ultra wealthy.[1]
[0] https://www.bbc.com/news/world-50964040
[1] For example: Even if you took half of Warren Buffet's wealth ($110 B) every year for the rest of his life (90 years old, today), he'd probably still die a billionaire. And even if he lived to be a 100, he'd still have $100 million.
> So it's okay to encroach on the privacy of private individuals as long as it serves a political purpose?
Interesting how your turn "public interest" into "political purpose".
Interesting how your turn "public interest" into "political purpose".
I think, in this case, the rich encroach on my privacy enough that it seems proportionate.
It's not okay to shoot your neighbor. It is okay to shoot your neighbor if they're shooting at you.
When the rich stop trading my data, I'll fight for their privacy too.
It's not okay to shoot your neighbor. It is okay to shoot your neighbor if they're shooting at you.
When the rich stop trading my data, I'll fight for their privacy too.
So lots of people saying the ultra rich are hard to tax because they take out loans against assets to fund the day-to-day. This then results in an argument about the morality/viability/etc of a wealth tax.
But... why can't we just tax the loans?
But... why can't we just tax the loans?
If you tax loans that means every credit card purchase or mortgage would trigger a tax. If you receive a $400k loan for a mortgage, that would mean something like $100k in taxes for an upper middle earner.
Thresholds + only collateralized loans?
Pawnshops are collateralized loans for the poor.
If the goal is to tax the rich, just be more direct and tax the rich. A wealth tax would work, no need for elaborate schemes.
If the goal is to tax the rich, just be more direct and tax the rich. A wealth tax would work, no need for elaborate schemes.
> Pawnshops are collateralized loans for the poor.
Yes, that's why I said "thresholds". Not suggesting we tax small loans (or a small total value of loans taken out by an individual, regardless of the value of the individual loans).
> wealth tax
By many people's estimation, a wealth tax is an elaborate scheme, because is unrealized wealth really wealth?
If Bezos has $100B in stock but a sale of all that stock would only fetch $60B, do we still tax on $100B? How can someone's wealth be realistically and equitably calculated if it is not realized? Putting fairness aside for a minute, you are probably severely underestimating the overhead / elaborateness of such calculations.
Yes, that's why I said "thresholds". Not suggesting we tax small loans (or a small total value of loans taken out by an individual, regardless of the value of the individual loans).
> wealth tax
By many people's estimation, a wealth tax is an elaborate scheme, because is unrealized wealth really wealth?
If Bezos has $100B in stock but a sale of all that stock would only fetch $60B, do we still tax on $100B? How can someone's wealth be realistically and equitably calculated if it is not realized? Putting fairness aside for a minute, you are probably severely underestimating the overhead / elaborateness of such calculations.
Small business owners take out loans in order to build up their company. Making that harder seems like something HN would implicitly dislike.
yes that's called interest which the fed is reluctant to raise to appease the same lot in the name of improving employment.
Your comment made me realize something.
The government is funded by taxes and bond sales. Bond purchases absorb high interest rate demand across the entire market. If there weren't any taxes, there would be higher interest rates. So taxes are what subsidizes low interest rates. We're the ones paying the interest on their loans.
Now it all makes sense. Mind is blown.
The government is funded by taxes and bond sales. Bond purchases absorb high interest rate demand across the entire market. If there weren't any taxes, there would be higher interest rates. So taxes are what subsidizes low interest rates. We're the ones paying the interest on their loans.
Now it all makes sense. Mind is blown.
The article seems to be toggling the conflation of income vs net worth.
Ok HN! We are intelligent, rational, and well intentioned- but we are also diverse! And it is great.
Can someone please help me with the following! Why do we still compare WEALTH with INCOME tax?
Of COURSE wealth is skewed: you go negative pretty fast (college and mortgage), and then you accumulate over time. It is a pretty rational progress. Income can vary over time - and the tax should vary, too.
Why do we smash these two together? Are we DELIBERATLY pushing for a wealth tax? We we doing it underhandedly? Is it ACTUALLY a good idea?
Can someone please help me with the following! Why do we still compare WEALTH with INCOME tax?
Of COURSE wealth is skewed: you go negative pretty fast (college and mortgage), and then you accumulate over time. It is a pretty rational progress. Income can vary over time - and the tax should vary, too.
Why do we smash these two together? Are we DELIBERATLY pushing for a wealth tax? We we doing it underhandedly? Is it ACTUALLY a good idea?
I also don't understand how wealth and income can be conflated like this. We have an income tax, so, no duh, we tax income, not wealth. Criticizing the income tax because it doesn't tax wealth is like criticizing sales tax because it doesn't tax property values. They aren't the same.
I don't get how ProPublica can take such a stance. Either it's intentional, which is bad, or it's unintentional, which is even worse?
I don't get how ProPublica can take such a stance. Either it's intentional, which is bad, or it's unintentional, which is even worse?
80% of the actual article, https://www.propublica.org/article/the-secret-irs-files-trov..., is discussing this exact thing.
This isn't a case where there's a journalistic sleight-of-hand, trying to conflate and confuse wealth and income. one could argue that the entire thesis of the article is that because we tax income and not wealth, those with wealth avoid ever realizing income, relying on loans instead of income.
It's an article about the end result of taxing income instead of wealth, there's literally a massive interactive scrolling graphic that discusses it half-way through.
This isn't a case where there's a journalistic sleight-of-hand, trying to conflate and confuse wealth and income. one could argue that the entire thesis of the article is that because we tax income and not wealth, those with wealth avoid ever realizing income, relying on loans instead of income.
It's an article about the end result of taxing income instead of wealth, there's literally a massive interactive scrolling graphic that discusses it half-way through.
Well yeah that's obvious. I could summarize this whole article by saying that wealthy people don't pay much income tax because they don't report much taxable income. Since we don't tax wealth separately from income, they don't pay much tax.
There, I summarized all their intense reporting in an obvious way. What does it tell us? Nothing that we don't already know.
All they are arguing about is taxing wealth separately from taxing income. That will never happen for many reasons.
There, I summarized all their intense reporting in an obvious way. What does it tell us? Nothing that we don't already know.
All they are arguing about is taxing wealth separately from taxing income. That will never happen for many reasons.
> Their wealth derives from the skyrocketing value of their assets, like stock and property. Those gains are not defined by U.S. laws as taxable income unless and until the billionaires sell.
Taxing assets seems like it could be bad for the 99%, for example taxing people out of their homes and eating up their savings and retirement assets.
It's reminiscent of how "financial aid" tacitly assumes that one's parents should simply sell their house and then give the money to the university.
Taxing assets seems like it could be bad for the 99%, for example taxing people out of their homes and eating up their savings and retirement assets.
It's reminiscent of how "financial aid" tacitly assumes that one's parents should simply sell their house and then give the money to the university.
If you read the article, they are calculating a fictitious thing they call the “true tax rate”. This is the tax paid compared to the growth in assets.
That is not an income tax. It’s a wealth tax. It feels like conflating the debt and the deficit. Effectively you would have to have a deemed sale of all assets at the end of the year and pay tax on the gain/loss.
I agree that the rich have access to tax planning machinations that most tax payers do not. But this doesn’t bluster their argument.
That is not an income tax. It’s a wealth tax. It feels like conflating the debt and the deficit. Effectively you would have to have a deemed sale of all assets at the end of the year and pay tax on the gain/loss.
I agree that the rich have access to tax planning machinations that most tax payers do not. But this doesn’t bluster their argument.
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Imo, Wyoming or Sweden not something in between. Most economies do something in between and outrageously favour maintenance of large stores of ultimately unworkable existing wealth.
But we already know the 'secrets' of the .001%:
1. Hide income and assets whenever possible.
2. When #1 is not possible, structure visible income and assets to leverage the most advantageous tax rules.
1. Hide income and assets whenever possible.
2. When #1 is not possible, structure visible income and assets to leverage the most advantageous tax rules.
Not a great reading experience to have to scroll through nearly endless fawning of "ooh look at how we are such responsible journalists" to get to the actual story.
If they distill this information down to things that any person can use then it will be useful.
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oh gosh, something is definitely going to happen, this time, i'm sure!
Side-note: although not part of the 0.001%, it's mind blowing that it's June 2021, and we still haven't seen Trump's promised tax return.
Did Trump make that promise? Are you REALLY surprised he didn't fill that promise?
Yes he did make that promise and no, of course no one should be surprised Trump lied directly and repeatedly to voters.
Large grain of salt required. But, at least they were honest enough to state (in the middle of the article), that the information on which this is based is suspect:
"We do not know the identity of our source. We did not solicit the information they sent us. The source says they were motivated by our previous coverage of issues surrounding the IRS and tax enforcement, but we do not know for certain that is true. We have considered the possibility that information we have received could have come from a state actor hostile to American interests."
"We do not know the identity of our source. We did not solicit the information they sent us. The source says they were motivated by our previous coverage of issues surrounding the IRS and tax enforcement, but we do not know for certain that is true. We have considered the possibility that information we have received could have come from a state actor hostile to American interests."
> we do not know for certain that is true. We have considered the possibility that information we have received could have come from a state actor hostile to American interests
If they have no way to verify or at least assure themselves that it isn’t this, then they have no business publishing it.
Also, many of their statements are just lies in that context:
E.g. We are disclosing the tax details of the richest Americans …
Is a lie.
“We are disclosing what an unknown source who could be a hostile foreign agent has told us are the tax details of the richest Americans.”
Is true.
It will be interesting to see whose secrets are included and whose are not. For example if they have Bloomberg’s details, do they have Trumps?
If they have no way to verify or at least assure themselves that it isn’t this, then they have no business publishing it.
Also, many of their statements are just lies in that context:
E.g. We are disclosing the tax details of the richest Americans …
Is a lie.
“We are disclosing what an unknown source who could be a hostile foreign agent has told us are the tax details of the richest Americans.”
Is true.
It will be interesting to see whose secrets are included and whose are not. For example if they have Bloomberg’s details, do they have Trumps?
They also state:
"We have gone to considerable lengths to confirm that the information sent to us is accurate. We compared the tax data in our possession to other sources of the same information wherever we could find them, some of which were public (a tax return for a candidate for national office), others of which were private. In every instance we were able to check — involving tax filings by more than 50 separate people — the details provided to ProPublica matched the information from other sources."
"We have gone to considerable lengths to confirm that the information sent to us is accurate. We compared the tax data in our possession to other sources of the same information wherever we could find them, some of which were public (a tax return for a candidate for national office), others of which were private. In every instance we were able to check — involving tax filings by more than 50 separate people — the details provided to ProPublica matched the information from other sources."
Sure, but it’s likely that a state actor had this information too.
Any credible attempt at deception would use as much corroboratable data as possible.
Any credible attempt at deception would use as much corroboratable data as possible.
I find it unlikely that even a state actor would have access to literally all the same private data that ProPublica has acquired over the years, and that they'd know what data ProPublica has and what can be safely manipulated.
Yes, state actors have a lot of resources and capabilities, but omniscience is not one of them.
Why would they need omniscience?
Probability.
Let's say a state actor had access to a whole pile of tax returns and wanted to manipulate them to change the conclusions ProPublica would draw. The state actor changes half the data points. Let's say ProPublica was able to check an average of 3 data points on those 50 individuals they reviewed. The data point could have either been manipulates or untouched. I'd model this like a coin flip and say that if ProPublica didn't find the manipulation after checking 150 data points, it's like flipping 150 heads in a row or 2^150 or basically impossible.
Let's say a state actor had access to a whole pile of tax returns and wanted to manipulate them to change the conclusions ProPublica would draw. The state actor changes half the data points. Let's say ProPublica was able to check an average of 3 data points on those 50 individuals they reviewed. The data point could have either been manipulates or untouched. I'd model this like a coin flip and say that if ProPublica didn't find the manipulation after checking 150 data points, it's like flipping 150 heads in a row or 2^150 or basically impossible.
This is a straw man.
Firstly we have no idea how many of the 50 individuals data were public or not. All public data can be discounted since the state actor can just copy it.
Secondly, for the private data, the definition of ‘private’ is unspecified. It really just means not part of a published record. If propublica has access to it, then why couldn’t someone else?
I agree that if there were 150 separate sources with data not disclosed anywhere else, it would be impossible to guess.
But that’s just a made up scenario.
There could be many correct records that are public, and one or two that are private but available to (or even provided through another channel of) the state actor.
As long as the fake records are not part of the public or private data propublica already has, there would be no way to verify them.
This of course assumes that propublica’s list of records itself is kept securely.
Firstly we have no idea how many of the 50 individuals data were public or not. All public data can be discounted since the state actor can just copy it.
Secondly, for the private data, the definition of ‘private’ is unspecified. It really just means not part of a published record. If propublica has access to it, then why couldn’t someone else?
I agree that if there were 150 separate sources with data not disclosed anywhere else, it would be impossible to guess.
But that’s just a made up scenario.
There could be many correct records that are public, and one or two that are private but available to (or even provided through another channel of) the state actor.
As long as the fake records are not part of the public or private data propublica already has, there would be no way to verify them.
This of course assumes that propublica’s list of records itself is kept securely.
I’m assuming good faith on ProPublica’s part, that a reasonable amount of the data was private and that it was truly private. If I didn’t trust them I wouldn’t read their reporting.
Hardly a defense of claim that ‘probability’ means a state actor would need to be ‘omniscient’ to manipulate them.
Indeed you have proven my point - which is that they don’t give us enough information to do anything except blindly trust them.
Indeed you have proven my point - which is that they don’t give us enough information to do anything except blindly trust them.
This is a straw man. There is no reason they would need ‘literally all’ of Propublica’s data. We don’t know how many data points were verified, but it need not be many.
>In every instance we were able to check — involving tax filings by more than 50 separate people — the details provided to ProPublica matched the information from other sources.
So we know it was at least 50 data points and not all of them were public. It was likely many hundreds of data points since it would be trivial to check more than one number if you already had 2 copies of a tax return pulled up.
If we take ProPublica's words to be accurate, then how would a state actor know exactly which 50 individuals ProPublica would have access to given that they would have a vast network of contacts and can and did ask the individuals involved to review the information they received and point out any inaccuracies.
Either these are real tax returns, ProPublica is lying or the state actor has a crystal ball.
So we know it was at least 50 data points and not all of them were public. It was likely many hundreds of data points since it would be trivial to check more than one number if you already had 2 copies of a tax return pulled up.
If we take ProPublica's words to be accurate, then how would a state actor know exactly which 50 individuals ProPublica would have access to given that they would have a vast network of contacts and can and did ask the individuals involved to review the information they received and point out any inaccuracies.
Either these are real tax returns, ProPublica is lying or the state actor has a crystal ball.
> 50 individuals
Still a straw man - how many of these 50 were public? It’s only the private ones that matter.
> It was likely many hundreds of data points since it would be trivial to check more than one number if you already had 2 copies of a tax return pulled up.
How is this relevant? Multiple points from public sources don’t show anything.
The only thing that matters is the number of sources who are both independent and private.
All an attacker would need to do is have access to a few of these private records and they could make their leak look genuine.
Still a straw man - how many of these 50 were public? It’s only the private ones that matter.
> It was likely many hundreds of data points since it would be trivial to check more than one number if you already had 2 copies of a tax return pulled up.
How is this relevant? Multiple points from public sources don’t show anything.
The only thing that matters is the number of sources who are both independent and private.
All an attacker would need to do is have access to a few of these private records and they could make their leak look genuine.
From the article:
> Provenance is not essential; accuracy is. We have gone to considerable lengths to confirm that the information sent to us is accurate. We compared the tax data in our possession to other sources of the same information wherever we could find them, some of which were public (a tax return for a candidate for national office), others of which were private. In every instance we were able to check — involving tax filings by more than 50 separate people — the details provided to ProPublica matched the information from other sources.
They did assure themselves by verifying any detail that they could corroborate, it seems.
> Provenance is not essential; accuracy is. We have gone to considerable lengths to confirm that the information sent to us is accurate. We compared the tax data in our possession to other sources of the same information wherever we could find them, some of which were public (a tax return for a candidate for national office), others of which were private. In every instance we were able to check — involving tax filings by more than 50 separate people — the details provided to ProPublica matched the information from other sources.
They did assure themselves by verifying any detail that they could corroborate, it seems.
>Large grain of salt required.
What exactly do I need to "take" with a large grain of salt? Have you been in seclusion for the past 20 years? I'm pretty sure we're at the point where the burden of proof is on the billionaires to demonstrate they aren't funnelling away their money, not vice versa.
What exactly do I need to "take" with a large grain of salt? Have you been in seclusion for the past 20 years? I'm pretty sure we're at the point where the burden of proof is on the billionaires to demonstrate they aren't funnelling away their money, not vice versa.
Evidence isn't necessary for one who is already convinced.
However, there is a lot that says that the 1% actually pay the vast majority of taxes collected:
https://www.publishedreporter.com/2021/04/05/op-ed-top-1-inc...
https://howmuch.net/articles/high-income-americans-pay-major...
https://taxfoundation.org/top-1-percent-pays-more-taxes-bott...
However, there is a lot that says that the 1% actually pay the vast majority of taxes collected:
https://www.publishedreporter.com/2021/04/05/op-ed-top-1-inc...
https://howmuch.net/articles/high-income-americans-pay-major...
https://taxfoundation.org/top-1-percent-pays-more-taxes-bott...
> However, there is a lot that says that the 1% actually pay the vast majority of taxes collected:
Yes, that's an argument against people who want Europe-style social programs while simultaneously making the US tax code even more progressive than it already is (it's generally considered the the most progressive in the world).
It's true that the top 1% to pay most of the taxes, and it's also true that the top 0.1% or so pay a significantly lower tax rate than those in the income ranges just below that level.
Yes, that's an argument against people who want Europe-style social programs while simultaneously making the US tax code even more progressive than it already is (it's generally considered the the most progressive in the world).
It's true that the top 1% to pay most of the taxes, and it's also true that the top 0.1% or so pay a significantly lower tax rate than those in the income ranges just below that level.
"The top earners pay the majority of tax already!" is a smoke and mirrors argument to try and distract you, especially when they've been collecting all the income gains. Consider that if there are income gains which go exclusively to the wealthy but the tax code stays the same, by definition they will end up paying an increasing percentage of total tax revenue, even though this situation does not mean their taxes need to be decreased - precisely the opposite.
> Evidence isn't necessary for one who is already convinced.
I suppose that cuts both ways then: https://theintercept.com/2019/04/13/tax-day-taxes-statistics...
I suppose that cuts both ways then: https://theintercept.com/2019/04/13/tax-day-taxes-statistics...
That article fails to address a key point: the vast majority of those "regressive" taxes are really forced savings for retirement, where you get a return based on your contributions.
FICA taxes are capped because the benefits are as well.
FICA taxes are capped because the benefits are as well.
> , there is a lot that says that the 1% actually pay the vast majority of taxes collected:
What a strange argument. I will personally pay 95% of all taxes in the US if I somehow make me make 99% of all income. Which seems fairly equivalent to your point, except both of my numbers are slightly exaggerated.
What a strange argument. I will personally pay 95% of all taxes in the US if I somehow make me make 99% of all income. Which seems fairly equivalent to your point, except both of my numbers are slightly exaggerated.
Right now, the top 20% pay a significantly higher share of the federal income tax collected than their share of income.
Now you're shifting the goalpost. You're revising it now to income taxes. It's most certainly not true of all taxes, and I don't even believe of all federal taxes.
I'm not shifting the goalposts, this conversation is about federal income taxes and every reference in the post you originally replied to is discussing federal income taxes.
On top of that, the top 20% of income earners do pay a larger share of taxes overall than their share of revenue, even according to organizations advocating for higher taxes on the wealthy: https://theintercept.com/2019/04/13/tax-day-taxes-statistics...
On top of that, the top 20% of income earners do pay a larger share of taxes overall than their share of revenue, even according to organizations advocating for higher taxes on the wealthy: https://theintercept.com/2019/04/13/tax-day-taxes-statistics...
The next article in the series states that the mass of citizens with equivalent wealth pay about 100x the tax.
The billionaires may pay more tax individually, but they don’t pay a fair share, if that’s true. Given what we know about Trump’s taxes and what Buffett has been saying, I found it entirely believable.
The billionaires may pay more tax individually, but they don’t pay a fair share, if that’s true. Given what we know about Trump’s taxes and what Buffett has been saying, I found it entirely believable.
OTOH, ProPublica reached out to Bezos, Musk, etc with this info and they essentially had no comment.
Surely people recognize that the related article purposely misleads readers by calculating false tax rates based not on income but paper wealth that is not real or recognized. ProPublica has a hard progressive bias, this article being one among many examples.
Our political leaders and absolutely terrible media are the villains here… not the rich people protecting their wealth.
Tax is obsolete. You won't fix it with more.