Tim Sweeney: Tax bill would likely end founder control of independent companies(twitter.com)
twitter.com
Tim Sweeney: Tax bill would likely end founder control of independent companies
https://twitter.com/TimSweeneyEpic/status/1453484672827240457
495 comments
> Epic Games is a privately held company, and not traded on established securities markets or readily available on secondary markets.
But suppose it were publicly held, with Sweeney holding majority ownership. Why would that distinction make his criticism of this tax scheme invalid? It seems to me his criticism is still perfectly valid, it only applies to a smaller set of companies.
But suppose it were publicly held, with Sweeney holding majority ownership. Why would that distinction make his criticism of this tax scheme invalid? It seems to me his criticism is still perfectly valid, it only applies to a smaller set of companies.
Yes, but the strength of the criticism is really dependent on the number of companies that it applies to.
If his criticism applied to every company and every founder in the country, it would be devastating and the law shouldn't be considered at all.
If the criticism would affect the control of only a single company, then it's a much smaller concern.
So, saying: "this criticism is quite a bit smaller in scope than it was being presented as" is a significant change.
> Why would that distinction make his criticism of this tax scheme invalid?
I didn't say his criticism was "invalid". I said that one factual claim he made was wrong (which it was), and that the commenters here were overlooking some of these mitigating factors.
It doesn't mean we should entirely ignore the concerns that he raised, but I think we should evaluate those concerns in a complete and measured way. By the same token, I don't think raising a "valid" criticism also totally dooms the proposal. It's possible that there are other mitigations we can apply, but fundamentally every tax structure has to balance the good with the bad. We need to decide if the benefits of the structure outweigh the downsides.
Is it possible that this tax scheme would require the founders of some companies to sometimes sell shares to cover their tax burden? Yes, it's possible.
Is it possible that the amount of shares those founders would have to sell could impact their control over the company? Yes, it's certainly possible.
How many companies that are founder controlled will be forced to no longer be founder controlled because of this tax scheme? Based on the legislative text, I suspect it's a very small number and might be 0, but I grant that it may not be 0.
If his criticism applied to every company and every founder in the country, it would be devastating and the law shouldn't be considered at all.
If the criticism would affect the control of only a single company, then it's a much smaller concern.
So, saying: "this criticism is quite a bit smaller in scope than it was being presented as" is a significant change.
> Why would that distinction make his criticism of this tax scheme invalid?
I didn't say his criticism was "invalid". I said that one factual claim he made was wrong (which it was), and that the commenters here were overlooking some of these mitigating factors.
It doesn't mean we should entirely ignore the concerns that he raised, but I think we should evaluate those concerns in a complete and measured way. By the same token, I don't think raising a "valid" criticism also totally dooms the proposal. It's possible that there are other mitigations we can apply, but fundamentally every tax structure has to balance the good with the bad. We need to decide if the benefits of the structure outweigh the downsides.
Is it possible that this tax scheme would require the founders of some companies to sometimes sell shares to cover their tax burden? Yes, it's possible.
Is it possible that the amount of shares those founders would have to sell could impact their control over the company? Yes, it's certainly possible.
How many companies that are founder controlled will be forced to no longer be founder controlled because of this tax scheme? Based on the legislative text, I suspect it's a very small number and might be 0, but I grant that it may not be 0.
> How many companies that are founder controlled will be forced to no longer be founder controlled because of this tax scheme? Based on the legislative text, I suspect it's a very small number and might be 0, but I grant that it may not be 0.
I guess one can do the mental exercise of consider what would have happened had this law been in place already to Bill, Jeff, Sergei, Larry, and Mark.
Ignoring whether it's a "good thing" or "bad thing": Mark owned 22% of FB shares at IPO in 2012, 4 years later the market cap was ~$500B, so assuming he kept 22% ownership throughout, he went from ~20 to ~$100B of wealth, meaning over those 4 years he'd have to find how to pay for an extra $16B tax bill (20% of 80B gain). Unless his salary was set to a couple billions a year, he'd definitely have to sell some of the stocks.
As a way to protect himself from this dilution in ownership, what could he do?
- Setup a complex class of shares (like F class described somewhere else in this thread)?
- Not go public?
The Mark, Jeff etc of the world are obviously the extreme outliers, but the same would apply to "smaller fish" (billionaires still!), Including Tim Sweeney if if ever wanted to take his company public.
I guess one can do the mental exercise of consider what would have happened had this law been in place already to Bill, Jeff, Sergei, Larry, and Mark.
Ignoring whether it's a "good thing" or "bad thing": Mark owned 22% of FB shares at IPO in 2012, 4 years later the market cap was ~$500B, so assuming he kept 22% ownership throughout, he went from ~20 to ~$100B of wealth, meaning over those 4 years he'd have to find how to pay for an extra $16B tax bill (20% of 80B gain). Unless his salary was set to a couple billions a year, he'd definitely have to sell some of the stocks.
As a way to protect himself from this dilution in ownership, what could he do?
- Setup a complex class of shares (like F class described somewhere else in this thread)?
- Not go public?
The Mark, Jeff etc of the world are obviously the extreme outliers, but the same would apply to "smaller fish" (billionaires still!), Including Tim Sweeney if if ever wanted to take his company public.
"Not go public" seems most sensible to me, from both sides, being a Zuck/Bezos/Gates/etc, and being the rest of the economy and society with Z/B/G/etc's in it.
If your priority is continuing to own your creation, then by all means, keep it.
If the setup disincentivises the creation of Z/B/G/etc's, I don't consider that a detriment to the overall society.
If your priority is continuing to own your creation, then by all means, keep it.
If the setup disincentivises the creation of Z/B/G/etc's, I don't consider that a detriment to the overall society.
> As a way to protect himself from this dilution in ownership, what could he do?
First, I think a “dilution in ownership” for founders is possible as an outcome of the tax structure.
My quibble is mostly that the dilution will affect fewer companies that was presented, and will be less dilution than was presented. Specifically, I think it’d be a small enough amount that it’d flip the control from the individual founders to not the individual founders.
In the FB example, it’s worth noting that as of 2019 Facebook already had two classes of shares (class A, held by public investors, and class B held by FB executives, which have 10x the voting power), which (again, in 2019) gave Zuckerberg total control of Facebook.
So, insofar as dual classes of shares already exist, that certainly seems like one option. Zuckerberg can sell class A shares for his tax burden, but keep class B shares. That would dilute his ownership to some extent, but his voting power would be diluted significantly less.
Other options could be paying the tax burden over 5 years instead of a single year (which is in the legislative text), which’d let him pay his tax burden with something like hundreds of millions per year.
Another option instead of selling stock would be to take out loans collateralized by the stock, and use that to pay the tax burden. This would effectively allow them to pay the tax burden over (say) 30 years, which again makes it easier to cover on salary alone.
Or, they could forego the benefits of being a public company (or being a private company that’s readily tradable on secondary markets). There are real downsides to that, though.
To your point, though, I think it’s fair to say that this tax law may dilute the ownership interest of billionaires to some degree. I think it’s less likely than Tim Sweeney was suggesting to wrest control out of founder’s hands (though obviously still possible, especially for any founder that is just barely holding on to 50% ownership).
First, I think a “dilution in ownership” for founders is possible as an outcome of the tax structure.
My quibble is mostly that the dilution will affect fewer companies that was presented, and will be less dilution than was presented. Specifically, I think it’d be a small enough amount that it’d flip the control from the individual founders to not the individual founders.
In the FB example, it’s worth noting that as of 2019 Facebook already had two classes of shares (class A, held by public investors, and class B held by FB executives, which have 10x the voting power), which (again, in 2019) gave Zuckerberg total control of Facebook.
So, insofar as dual classes of shares already exist, that certainly seems like one option. Zuckerberg can sell class A shares for his tax burden, but keep class B shares. That would dilute his ownership to some extent, but his voting power would be diluted significantly less.
Other options could be paying the tax burden over 5 years instead of a single year (which is in the legislative text), which’d let him pay his tax burden with something like hundreds of millions per year.
Another option instead of selling stock would be to take out loans collateralized by the stock, and use that to pay the tax burden. This would effectively allow them to pay the tax burden over (say) 30 years, which again makes it easier to cover on salary alone.
Or, they could forego the benefits of being a public company (or being a private company that’s readily tradable on secondary markets). There are real downsides to that, though.
To your point, though, I think it’s fair to say that this tax law may dilute the ownership interest of billionaires to some degree. I think it’s less likely than Tim Sweeney was suggesting to wrest control out of founder’s hands (though obviously still possible, especially for any founder that is just barely holding on to 50% ownership).
What is to prevent "franking" of capital gains the way dividends are franked (ie. every shareholder gets paid back whatever capital gains taxes they would need to pay to keep their stocks/control stable) ?
Obviously shareholders who are all equally affected by this would find this to be a fair deal. Likewise these companies exist because of the vision of the founders (or at least, that's a good argument to make. See Yahoo vs Google for example, or even Yahoo by itself)
Obviously shareholders who are all equally affected by this would find this to be a fair deal. Likewise these companies exist because of the vision of the founders (or at least, that's a good argument to make. See Yahoo vs Google for example, or even Yahoo by itself)
I don't think anything would prevent it, but I doubt many companies would have equally affected shareholders.
The point that I agree with Tim the most is that this legislation only affects individuals, not corporate owners. I'd absolutely want to apply it to those owners as well. But, an investment group would not be taxed the same way as individual owners, and so might be less inclined to approve such payments.
Also, since each individual can exempt up to $1B in assets, it would only be those individuals that hold a massive amount of the company that would typically be liable for the tax burden. So, an early employee that has $900M of Facebook shares wouldn't receive any of the tax-payback money that Zuckerberg would receive. Because the exposure would be fairly selective, it seems marginally less likely that enough shareholders would be equally affected at a company to find it to be a fair deal.
The point that I agree with Tim the most is that this legislation only affects individuals, not corporate owners. I'd absolutely want to apply it to those owners as well. But, an investment group would not be taxed the same way as individual owners, and so might be less inclined to approve such payments.
Also, since each individual can exempt up to $1B in assets, it would only be those individuals that hold a massive amount of the company that would typically be liable for the tax burden. So, an early employee that has $900M of Facebook shares wouldn't receive any of the tax-payback money that Zuckerberg would receive. Because the exposure would be fairly selective, it seems marginally less likely that enough shareholders would be equally affected at a company to find it to be a fair deal.
If it only affects individuals, it's trivial to circumvent. Have a holding company under your control "owned" by a bunch of people (who are well paid for that role, but have no control. You could even do it the middle eastern way and use extended family for that). Besides, I'm personally much more worried about Blackrock than I am about Bezos, or any billionnaire.
But "doing something" while doing nothing. That, I imagine, is the intention.
any tax rule can be circumvented, because the US allows international share ownership ... which they in fact do:
https://www.forbes.com/sites/danielmitchell/2012/05/11/faceb...
So this needs compromise, talking. The main talking point of these founders seem to be that they want to maintain control of these companies, and choose their successor. Do we care about that with this legislation? Why not give them that?
But "doing something" while doing nothing. That, I imagine, is the intention.
any tax rule can be circumvented, because the US allows international share ownership ... which they in fact do:
https://www.forbes.com/sites/danielmitchell/2012/05/11/faceb...
So this needs compromise, talking. The main talking point of these founders seem to be that they want to maintain control of these companies, and choose their successor. Do we care about that with this legislation? Why not give them that?
> As a way to protect himself from this dilution in ownership, what could he do?
Borrow against his stock holdings to pay the taxes, at interest rates far below the rate of stock appreciation. (That people already do this—but not for taxes—to perpetually avoid realizing gains while enjoying all the benefits of the gains is central to the explicit motivation of this bill, so its kind of a major oversight to ignore it as an option for paying the taxes.)
Borrow against his stock holdings to pay the taxes, at interest rates far below the rate of stock appreciation. (That people already do this—but not for taxes—to perpetually avoid realizing gains while enjoying all the benefits of the gains is central to the explicit motivation of this bill, so its kind of a major oversight to ignore it as an option for paying the taxes.)
I don't know, I think we should trust the ultra-wealthy guy when he says that paying his fair share of taxes will hurt the little guy.
> But suppose it were publicly held,
But its not, for a reason, and there are existing reasons why companies don't tend to go public while still in the meteoric valuation growth phase.
And when companies are public, so that stock is a tradable asset subject to the tax, you can borrow against it; with sustained rapid appreciation, the interest rates will be substantially below the rate of appreciation, so there is no reason to liquidate assets to pay stock. Without sustained rapid appreciation, liquidating sufficient stock to pay the taxes won't force people to liquidate the bulk of their holdings, even over a long time.
But its not, for a reason, and there are existing reasons why companies don't tend to go public while still in the meteoric valuation growth phase.
And when companies are public, so that stock is a tradable asset subject to the tax, you can borrow against it; with sustained rapid appreciation, the interest rates will be substantially below the rate of appreciation, so there is no reason to liquidate assets to pay stock. Without sustained rapid appreciation, liquidating sufficient stock to pay the taxes won't force people to liquidate the bulk of their holdings, even over a long time.
Its not like companies that are listing to the stock markets have any value left. Most of them are just using it after they've burned all their rounds of funding to hopefully dump the picked over carcass on retail and pension funds. So the less they CAN dump, the better.
> Epic Games is a privately held company, and not traded on established securities markets or readily available on secondary markets.
So this law would lead to a proliferation of privately held companies as billionaires avoid the stock market and other tradable covered assets?
So this law would lead to a proliferation of privately held companies as billionaires avoid the stock market and other tradable covered assets?
Maybe, but there are a lot of factors that drive IPO decision making and I don't think this would be a huge one.
It's not only traded on established securities market, it's also "readily available on secondary markets".
Basically, if there's a significant number of shares trading hands between parties on an ongoing low-friction basis it's going to be subject to the tax rules. Which means a company that wants to have a really large pool of investors wouldn't be able to skirt this by just not listing.
I think this law could affect the number of IPOs at the margins, but I suspect it wouldn't be the fundamental consideration for a lot of companies.
I think if this law was paired with one that treated putting shares as a collateral for a loan as a taxable event (that is, if you use your shares as the collateral for a loan, those shares are taxed as capital gains at the value that they were assigned as collateral) it would mitigate most of the "IPO avoidance" concerns, since another primary tax avoidance strategy would also be shut down.
It's not only traded on established securities market, it's also "readily available on secondary markets".
Basically, if there's a significant number of shares trading hands between parties on an ongoing low-friction basis it's going to be subject to the tax rules. Which means a company that wants to have a really large pool of investors wouldn't be able to skirt this by just not listing.
I think this law could affect the number of IPOs at the margins, but I suspect it wouldn't be the fundamental consideration for a lot of companies.
I think if this law was paired with one that treated putting shares as a collateral for a loan as a taxable event (that is, if you use your shares as the collateral for a loan, those shares are taxed as capital gains at the value that they were assigned as collateral) it would mitigate most of the "IPO avoidance" concerns, since another primary tax avoidance strategy would also be shut down.
There are lots of factors that drive IPO decisions, preferable treatment on capital gains is definitely one of them. You become taxed merely for holding shares (as a sort of share deprecation), then you won't do that if you have better options, so they will flock to better options. Building a private company is something they can do much more easily than anyone else, why wouldn't they? The complete avoidance of shares would then make the tax law meaningless.
For now. Tomorrow is you paying capital gain on your home each year. What happen to be able to deduct inflation from capital gains?
I mean, it's fair to say: "hey, where might this go in the future", but when discussing what this specific proposal is today, I'm suggesting that we have a more factually sound starting point.
Sweeny's twitter thread doesn't tell the whole story, and this comment chain has been treating it largely as fact. I wanted to add context and correct some of those points, so we can have a reasonable discussion.
Sweeny's twitter thread doesn't tell the whole story, and this comment chain has been treating it largely as fact. I wanted to add context and correct some of those points, so we can have a reasonable discussion.
Today, you pay property taxes based on some assessed value of your home every year, and in most municipalities, your home gained value. You're already paying tax on the gain in value of your home, what would be so different about paying tax on the gain in value of other illiquid, capital holdings?
So if you make improvements to your house over the course of a year, and/or the property value in the region goes way up, you could face an unpayable tax bill and lose your house. I don't have much sympathy for renters complaining about gentrification, but property tax laws like this are hot garbage.
Sounds like a great way to import rich people and exploit poor people by capping their level of home value.
Thanks for all that hard work on the house, sorry it's getting repo'd and auctioned. Next time, don't try to make a place to live so high quality!
Property tax should be paid on square footage of the boundaries. Impose a property sales tax with progressive residency penalties or some other extractive mechanism, but have the common decency to let people invest in and improve their own homes.
Sounds like a great way to import rich people and exploit poor people by capping their level of home value.
Thanks for all that hard work on the house, sorry it's getting repo'd and auctioned. Next time, don't try to make a place to live so high quality!
Property tax should be paid on square footage of the boundaries. Impose a property sales tax with progressive residency penalties or some other extractive mechanism, but have the common decency to let people invest in and improve their own homes.
If you can afford the cost of the improvements, the chances of you being unable to pay X% (where X is likely a single digit) taxes on the value of those improvements is ... small.
Sure, Georgism has a lot to recommend it (more or less exclusively taxing land), but that's not happening in the US any time soon.
Sure, Georgism has a lot to recommend it (more or less exclusively taxing land), but that's not happening in the US any time soon.
Also, notice that most property tax assessments are based on purely physical exterior-visible aspects of a home. If you convert that rats nest of a bathroom into a wondrous home spa, in most places no tax assessment change will follow.
Only if you don't file any permits, correct? I'm not aware of anywhere that won't reassess on major improvements. Which is partly why SF Bay area housing is so terrible - none of the owners want to trigger a reassessment, as in many cases it may increase their tax bill 10x.
I just got the form from the county for this for some improvements to my house, so I can answer. Permits for "improvements" are sent on to the county tax assessor, and they send you a form basically asking for the value of the improvement. Note that "maintenance" doesn't count, only "improvements" (and then only specific improvements; e.g., adding solar doesn't count). The value gets added to your Prop 13 value, but does not trigger a complete reassessment. So it's unlikely that any improvement would result in a 10x tax bill increase, unless you've owned the property for a long time (meaning that your Prop. 13 value was significantly less than the real value of the property).
The property I’m currently renting has an assessed value of $248k. A nearby comparable house just sold for $2m. It’s not unusual around here for that to be the case.
That means that your landlord would have to spend $2M on improvements alone in order for their tax bill to 10x.
Looks like you’re right! Ref for those curious [https://leginfo.legislature.ca.gov/faces/codes_displayText.x....]
Thanks
Thanks
I have not lived in any municipalities where doing remodelling that doesn't chnage the number of rooms or enlarge the total footprint of the built area would change tax assessment.
SF is not going to tax your house more because you went from Home Depot subway tile in the bathroom to Murano hand made glass from Italy, whether you file a permit or not. One of my children just had their house electrical system upgraded from knob&tube to contemporary romex, all under a permit, and I don't believe it will have any impact on their property taxes whatsoever.
If you did in fact add a room or enlarge the building, then it's worth more and will/should be taxed more, no? The taxes represent a small additional part of the total cost of the changes, spread out over years.
SF is not going to tax your house more because you went from Home Depot subway tile in the bathroom to Murano hand made glass from Italy, whether you file a permit or not. One of my children just had their house electrical system upgraded from knob&tube to contemporary romex, all under a permit, and I don't believe it will have any impact on their property taxes whatsoever.
If you did in fact add a room or enlarge the building, then it's worth more and will/should be taxed more, no? The taxes represent a small additional part of the total cost of the changes, spread out over years.
FYI - the house I’m renting, if it got reassessed at market rates, would go from $3600/yr in property taxes to $23000/yr in property taxes. Which for all but the most lavish upgrades would swamp the cost of the upgrades pretty quickly.
California Prop 13 causes some serious market distortions.
California Prop 13 causes some serious market distortions.
House price inflation happens not because people "invest" in homes but because of the market. It is to a great extent driven by low interest rates.
You already pay property taxes on your property each year. It is a non-trivial percentage of the house's value (~1% where I live).
Property taxes are also essential tools against speculation, since your asset naturally depreciates, and the more you bid it up, the more you pay (as a counter example where speculation rules the day because property taxes are absent, see China).
Property taxes are also essential tools against speculation, since your asset naturally depreciates, and the more you bid it up, the more you pay (as a counter example where speculation rules the day because property taxes are absent, see China).
The bigger point it misses is that this will never pass, at least not without massive loopholes allowing the ultra wealthy backers of these politicians to pay practically nothing. It's a stunt. The people voting for it will be able to claim they've been struggling with all their might to go after the capitalist fatcats, and the people voting against it will be able to say they've protected you from communists, and they'll all be heroes.
Yep, unfortunately it is all theater
“This significantly reduces the amount of shares he would have to liquidate to cover his take burden.”
Well dang I’m so relieved that it’s a measurably less severe amount of bullshit.
Well dang I’m so relieved that it’s a measurably less severe amount of bullshit.
It'd be pretty easy to levy completely fair and progressive tax structure that only directly impacts the wealthy, and is sufficient to cover the spending.
- Tax capital gains >1m a year as regular income.
- Fix loopholes that allow for equity as collateral for perpetual loans without ever selling the underlying.
- Remove step up in cost basis on inheriting assets.
- Tax stock buybacks at same level as dividends.
- Don't bring back SALT deduction.
Pretty easy to justify. Why should capital gains get favorable tax treatment over income, especially for wealthy who have this as a primary income source? Overall, proportion of assets allocated to investment capital would not dip due to change in tax, where else would they put the money?
Buybacks are effectively a technique to consolidate wealth primarily for the CEO and board of a company, who are paid primarily in equity comp. Very few companies do buybacks for legitimate operational reasons, like purchasing stock when it's undervalued to reduce operational expenses re dividends. It's mostly a buy at any price to juice valuations. I'm not against companies returning money to shareholders, but buybacks shouldn't be tax advantaged vs dividends.
SALT is a direct handout to wealthy homeowners. The fact that this is even in the spending bill shows how far the narrative of fixing wealth inequality has deviated from the actual legislation.
I suspect Congress doesn't do these things because it would actually impact their own finances. And of course they need unilateral agreement on any approach.
- Tax capital gains >1m a year as regular income.
- Fix loopholes that allow for equity as collateral for perpetual loans without ever selling the underlying.
- Remove step up in cost basis on inheriting assets.
- Tax stock buybacks at same level as dividends.
- Don't bring back SALT deduction.
Pretty easy to justify. Why should capital gains get favorable tax treatment over income, especially for wealthy who have this as a primary income source? Overall, proportion of assets allocated to investment capital would not dip due to change in tax, where else would they put the money?
Buybacks are effectively a technique to consolidate wealth primarily for the CEO and board of a company, who are paid primarily in equity comp. Very few companies do buybacks for legitimate operational reasons, like purchasing stock when it's undervalued to reduce operational expenses re dividends. It's mostly a buy at any price to juice valuations. I'm not against companies returning money to shareholders, but buybacks shouldn't be tax advantaged vs dividends.
SALT is a direct handout to wealthy homeowners. The fact that this is even in the spending bill shows how far the narrative of fixing wealth inequality has deviated from the actual legislation.
I suspect Congress doesn't do these things because it would actually impact their own finances. And of course they need unilateral agreement on any approach.
>- Remove step up in cost basis on inheriting assets.
my impression is that the step-up cost basis is there because you've already paid the estate tax when the assets were transferred to you? otherwise you'd end up getting double-taxed.
my impression is that the step-up cost basis is there because you've already paid the estate tax when the assets were transferred to you? otherwise you'd end up getting double-taxed.
I buy stock at price A and sell, it later, at price B. Assuming B > A, (if it isn't this is a whole different thing) then I am taxed on the gain the stock made, I pay tax on the value of (B-A). On the other hand, I do have all of the (B-A) cash, which is nice. (Or as my tax professor once said, it's always better to have more money rather than less, and to die later rather than sooner.)
Now let's say I still buy the stock at price A, but instead of selling I hold until my death and my heirs inherit. They pay the estate tax, yes (presuming that my total wealth is massive enough to reach that level), but they pay it as a % of value B- at this point no one owes the government any of that (B-A) tax.
Is that "double taxation"? Well, it kinda depends on your perspective, and this is a situation where perspective seems to be determined by bank balance. If you are wealthy, of course you feel that it is double taxation- it's two separate bites of taxes on the same underlying asset! If you aren't, then what you notice is that somehow this death has created a situation where the government never got it's cut of that (B-A) difference, so this is avoiding taxes.
Now let's say I still buy the stock at price A, but instead of selling I hold until my death and my heirs inherit. They pay the estate tax, yes (presuming that my total wealth is massive enough to reach that level), but they pay it as a % of value B- at this point no one owes the government any of that (B-A) tax.
Is that "double taxation"? Well, it kinda depends on your perspective, and this is a situation where perspective seems to be determined by bank balance. If you are wealthy, of course you feel that it is double taxation- it's two separate bites of taxes on the same underlying asset! If you aren't, then what you notice is that somehow this death has created a situation where the government never got it's cut of that (B-A) difference, so this is avoiding taxes.
> If you aren't, then what you notice is that somehow this death has created a situation where the government never got it's cut of that (B-A) difference, so this is avoiding taxes.
While capital was transferred, value increase was never really monetized. Would it not be fair to say that it will be taxed only once it turns into money, against the B-A gains, and A is taxed according to normal inheritance rates.
Of course, this has a huge practical issue of knowing what A was, which could be a while back.
While capital was transferred, value increase was never really monetized. Would it not be fair to say that it will be taxed only once it turns into money, against the B-A gains, and A is taxed according to normal inheritance rates.
Of course, this has a huge practical issue of knowing what A was, which could be a while back.
Taxing the B-A gains when they are sold, even after death, is what people mean by "eliminating the stepped-up basis" as the original poster suggested doing. At present, when a heir inherits at B they pay estate tax at B, but then if they sell at price C they only pay tax on (C-B).
As for knowing what A is, if you don't know it you can always fill in 0 and pay slightly more tax than you should, to be safe, so you don't caught in an audit. As of 2011 the IRS requires all brokers to track and report the cost basis for all purchases- that is, any purchase made after 2011 when you sell it they will tell you and the government what the value of A should be.
As for knowing what A is, if you don't know it you can always fill in 0 and pay slightly more tax than you should, to be safe, so you don't caught in an audit. As of 2011 the IRS requires all brokers to track and report the cost basis for all purchases- that is, any purchase made after 2011 when you sell it they will tell you and the government what the value of A should be.
> this has a huge practical issue of knowing what A was, which could be a while back
So why not put the burden of establishing a basis (A) on the person seeking to claim its benefit — who, in this case, is also best-positioned to gather such evidence?
Should they keep poor records, they lose the benefit of that basis, and will instead pay taxes on (B-0).
So why not put the burden of establishing a basis (A) on the person seeking to claim its benefit — who, in this case, is also best-positioned to gather such evidence?
Should they keep poor records, they lose the benefit of that basis, and will instead pay taxes on (B-0).
> government never got it's cut of that (B-A) difference
because the person who should be paying that cut is dead! You don't tax the dead.
because the person who should be paying that cut is dead! You don't tax the dead.
Why don't we tax the dead? Seriously, they aren't going to object! Why shouldn't we?
Who we tax, and what way, is entirely a choice made by a society. I routinely pay sales tax out of the income that I paid income tax on, and pay extra tax when I buy alcohol- those are all decisions made by society that they were the socially correct way to pay for everything we jointly need as a society. That's all taxes are.
The modern estate tax was created in 1916. In 1906, then President TR gave a speech supporting this kind of tax as a way to try and reduce the power of dynastic wealth- to keep American society from being ossified, and to make sure that the current generation of talented people could amass wealth too.
The modern income tax was created in 1909 as part of an attempt to clear the way for prohibition- a significant part of the Federal budget was paid for with alcohol taxes, and they needed to replace that hole in the budget[1]. For the first three decades it hit only a tiny percentage of the richest, until World War Two when it was expanded and covered a greater percentage of the population, as the Federal government massively expanded and needed more money to pay for its massive size[2].
But those were all the results of political choices, and taxing the dead makes just as much sense.
[1]: Similarly, women's suffrage was also, at least in the US, largely a proxy battle over prohibition- it seems to have been a widely held assumption of everyone in politics in 1910 that as soon as women's suffrage was achieved prohibition would follow immediately afterwards (in fact, prohibition passed two years before women's suffrage). This is why the largest anti-suffrage organization had as its honorary chairwoman Mrs. Adolphus Busch, matriarch of the Budweiser fortune.
[2]: Adam Tooze's book _The Deluge_ has as its basic thesis that the US Government was too small, and had too limited state capacity, which was a major cause of all of the problems of the 1920's and 1930's.
Who we tax, and what way, is entirely a choice made by a society. I routinely pay sales tax out of the income that I paid income tax on, and pay extra tax when I buy alcohol- those are all decisions made by society that they were the socially correct way to pay for everything we jointly need as a society. That's all taxes are.
The modern estate tax was created in 1916. In 1906, then President TR gave a speech supporting this kind of tax as a way to try and reduce the power of dynastic wealth- to keep American society from being ossified, and to make sure that the current generation of talented people could amass wealth too.
The modern income tax was created in 1909 as part of an attempt to clear the way for prohibition- a significant part of the Federal budget was paid for with alcohol taxes, and they needed to replace that hole in the budget[1]. For the first three decades it hit only a tiny percentage of the richest, until World War Two when it was expanded and covered a greater percentage of the population, as the Federal government massively expanded and needed more money to pay for its massive size[2].
But those were all the results of political choices, and taxing the dead makes just as much sense.
[1]: Similarly, women's suffrage was also, at least in the US, largely a proxy battle over prohibition- it seems to have been a widely held assumption of everyone in politics in 1910 that as soon as women's suffrage was achieved prohibition would follow immediately afterwards (in fact, prohibition passed two years before women's suffrage). This is why the largest anti-suffrage organization had as its honorary chairwoman Mrs. Adolphus Busch, matriarch of the Budweiser fortune.
[2]: Adam Tooze's book _The Deluge_ has as its basic thesis that the US Government was too small, and had too limited state capacity, which was a major cause of all of the problems of the 1920's and 1930's.
> You don't tax the dead.
Why not? If someone owes a bunch of taxes when they die, their estate should still be on the hook for it. I don't see any reason that money owed to the government should go to someone's heirs instead just because they happened to die at a specific time
Why not? If someone owes a bunch of taxes when they die, their estate should still be on the hook for it. I don't see any reason that money owed to the government should go to someone's heirs instead just because they happened to die at a specific time
> money owed to the government
but the money wasn't owed - because the gains were never realized, so the person (who died) never got to enjoy the consumption of that money, so therefore, it doesn't seem fair to take tax from somebody who would not be alive to defend themselves from it.
The heir receiving inheritance should get taxed - on the whole value (B in the OP's nomenclature). But the heir should not have to also pay B-A capital gains, which is a tax that would've been levied on the now dead, had they decided to sell instead of dying.
but the money wasn't owed - because the gains were never realized, so the person (who died) never got to enjoy the consumption of that money, so therefore, it doesn't seem fair to take tax from somebody who would not be alive to defend themselves from it.
The heir receiving inheritance should get taxed - on the whole value (B in the OP's nomenclature). But the heir should not have to also pay B-A capital gains, which is a tax that would've been levied on the now dead, had they decided to sell instead of dying.
When someone dies, it's necessary to file a tax return for them, if you're going to probate. The taxes need to be paid for that person, from the assets. So, yes, the norm is to tax the dead.
The estate tax is almost always double taxation in general. If you just save up money from working and then you die, you'll have paid income tax on that money, then you'll be taxed again on that same money under the estate tax. If you invested it and realized capital gains, you'll pay capital gains tax on those gains, then you'll be taxed on those same gains again under the estate tax. Unrealized capital gains are the exception and not the rule here.
There's nothing fundamentally wrong with "double taxation," no rule that says every dollar must be taxed exactly (or at most) once. Sales tax is also "double taxation," for example. It's a useful heuristic for determine what should and shouldn't be deductible from a particular tax base but it's not a hard-and-fast rule.
There's nothing fundamentally wrong with "double taxation," no rule that says every dollar must be taxed exactly (or at most) once. Sales tax is also "double taxation," for example. It's a useful heuristic for determine what should and shouldn't be deductible from a particular tax base but it's not a hard-and-fast rule.
Isn't double taxation when a tax applies on top of another tax? I think some people are trying to co-opt what it means to apply the "bad" reputation of double taxation to other things.
My own country has a famous issue with double taxation as I know it: diesel/gasoline have a specific tax and then VAT is calculated on top of original_price * gas_tax, instead of the original price.
So if the gas tax goes up 1% we end up paying more than 1% because it also the increases the value of the VAT.
My own country has a famous issue with double taxation as I know it: diesel/gasoline have a specific tax and then VAT is calculated on top of original_price * gas_tax, instead of the original price.
So if the gas tax goes up 1% we end up paying more than 1% because it also the increases the value of the VAT.
I was going to mention sales tax, but many other taxes are also double taxation I think like property tax or gas tax or whatever is not income tax since you will pay for them with whatever you have left after paying for income tax.
Discussing the estate tax without mentioning how few people are even subject to it is seriously misleading, even if you're not intending to be (and I don't think you are).
I need to read more into that. If true, the cost basis should only be stepped up such that it accounts for the estate tax.
I'd prefer some simpler overall approach though. Removing step up in cost basis alone obviates the need for an estate tax, as eventually assets would be sold and tax revenue generated.
But important to do some research into how often inherited assets are kept permanently and gains never realized (thus tax never paid).
Just on gut instinct, I would guess most who inherit wealth eventually sell off any assets. I recall it tends to be that most accumulated wealth is lost by the third generation.
I'd prefer some simpler overall approach though. Removing step up in cost basis alone obviates the need for an estate tax, as eventually assets would be sold and tax revenue generated.
But important to do some research into how often inherited assets are kept permanently and gains never realized (thus tax never paid).
Just on gut instinct, I would guess most who inherit wealth eventually sell off any assets. I recall it tends to be that most accumulated wealth is lost by the third generation.
> thus tax never paid
The estate tax is still due. The federal estate tax is 40%.
The estate tax is still due. The federal estate tax is 40%.
Almost nobody pays the estate tax.
>When a person dies, their assets could be subject to estate taxes and inheritance taxes, depending on where they lived and how much they were worth. While the threat of estate taxes and inheritance taxes does exist, in reality, the vast majority of estates are too small to be charged a federal estate tax—which, as of 2021, applies only if the assets of the deceased person are worth $11.70 million or more
(Investopedia; https://www.investopedia.com/articles/personal-finance/12071...)
>When a person dies, their assets could be subject to estate taxes and inheritance taxes, depending on where they lived and how much they were worth. While the threat of estate taxes and inheritance taxes does exist, in reality, the vast majority of estates are too small to be charged a federal estate tax—which, as of 2021, applies only if the assets of the deceased person are worth $11.70 million or more
(Investopedia; https://www.investopedia.com/articles/personal-finance/12071...)
> applies only if the assets of the deceased person are worth $11.70 million or more
And hence they apply to billionaires, which is the topic of this page.
And hence they apply to billionaires, which is the topic of this page.
Actually most billionaires manage to reshuffle their assets to that their estate, such as it is, is under the limit by the time they die. The main people hit by it are those holding large amounts of valuable land, and there are very few of them.
Almost all mentions of the estate tax in this thread has been generic whining about the fact that there is an estate tax. For almost all US persons, there is no estate tax.
Almost all mentions of the estate tax in this thread has been generic whining about the fact that there is an estate tax. For almost all US persons, there is no estate tax.
> Actually most billionaires manage to reshuffle their assets
I was talking to some people sufficiently wealthy that this is a concern, and their point is that the only reason some don't transfer their assets like this is fear of their own children. Unless you really are a farmer, or small business owner, the estate tax is completely optional if you trust your kids.
In 2019, there were only 2,570 estate taxes filed.
> Almost all mentions of the estate tax in this thread has been generic whining about the fact that there is an estate tax
There is also whining among people that they need to spend so much on accountants and lawyers to avoid what is essentially a completely bypassable tax.
So you can see how socially it is not a good use of our human capital to create this enormous tax avoidance industry, and how it would be much better to pass laws that didn't need to do things like value privately held businesses or artwork in order to determine your tax liability.
I was talking to some people sufficiently wealthy that this is a concern, and their point is that the only reason some don't transfer their assets like this is fear of their own children. Unless you really are a farmer, or small business owner, the estate tax is completely optional if you trust your kids.
In 2019, there were only 2,570 estate taxes filed.
> Almost all mentions of the estate tax in this thread has been generic whining about the fact that there is an estate tax
There is also whining among people that they need to spend so much on accountants and lawyers to avoid what is essentially a completely bypassable tax.
So you can see how socially it is not a good use of our human capital to create this enormous tax avoidance industry, and how it would be much better to pass laws that didn't need to do things like value privately held businesses or artwork in order to determine your tax liability.
If there are taxes, there's a tax avoidance industry. I mean, c'mon, there's a gigantic tax avoidance industry just for regular income tax.
The proposed law under discussion here explicitly excludes privately held businesses and artwork.
The proposed law under discussion here explicitly excludes privately held businesses and artwork.
> I mean, c'mon, there's a gigantic tax avoidance industry just for regular income tax.
Because we have an extremely complex tax code.
But seriously, eliminate all corporate taxes and replace that with a 10% VAT.
Treat all income the same -- I don't care whether it's a long term capital gain, or a meteor filled with gold crashing into your yard, don't distinguish at all. Put it all into a single bucket, get one number, look that up in a progressive rate table. Pay a percentage. No deductions of any kind for anything. Not for mortgage, not for kids, not for school, not for charity, not for solar panels, etc. But only tax income, not assets.
That would eliminate 99% of tax prep work.
Because we have an extremely complex tax code.
But seriously, eliminate all corporate taxes and replace that with a 10% VAT.
Treat all income the same -- I don't care whether it's a long term capital gain, or a meteor filled with gold crashing into your yard, don't distinguish at all. Put it all into a single bucket, get one number, look that up in a progressive rate table. Pay a percentage. No deductions of any kind for anything. Not for mortgage, not for kids, not for school, not for charity, not for solar panels, etc. But only tax income, not assets.
That would eliminate 99% of tax prep work.
The correct answer in my opinion has nothing to do with corporate taxation. The US government for some reason(s) (for another day) is almost completely unwilling to simply redistribute money to fund things it decides are worthy goals. Instead it creates tax credits and deductions that are supposed to do the same thing (at least for "the worthy").
We need to stop using tax code to implement policy. Taxes should be taxes, and if the government decides to pay people to encourage them to install solar PV/have children/buy new cars/invest in bitcoin/whatever, then the government should send them a check to do so.
So we're mostly in violent agreement, except that if corporations have any of the rights of people (and likewise, if people can somehow claim to be corporations), then I want them taxed just like people.
We need to stop using tax code to implement policy. Taxes should be taxes, and if the government decides to pay people to encourage them to install solar PV/have children/buy new cars/invest in bitcoin/whatever, then the government should send them a check to do so.
So we're mostly in violent agreement, except that if corporations have any of the rights of people (and likewise, if people can somehow claim to be corporations), then I want them taxed just like people.
Yeah, I agree on the households. The point about corporate taxes is we have so many loopholes. Historically, nations adopted a VAT because it's great at squashing tax-avoidance, as it encourages snitching. Basically you report you paid someone X, and then they have to pay the VAT instead of you. So it's a very clean and elegant solution to dealing with the problem of corporate accounting and tax avoidance.
In terms of treating a corporation the same as a household -- so that it pays taxes on all revenue, the problem is the economic distortions. There are just some businesses - like grocery stores -- that have high turnover and low margins. Other businesses have low turnover and high margins. And the tax code should not really penalize one at the expense of another. E.g. groceries just don't last, they have to be sold quickly. Furniture lasts a while. The reality of that natural difference trumps any appeals to logical symmetry in treating corporations the same as households.
In terms of treating a corporation the same as a household -- so that it pays taxes on all revenue, the problem is the economic distortions. There are just some businesses - like grocery stores -- that have high turnover and low margins. Other businesses have low turnover and high margins. And the tax code should not really penalize one at the expense of another. E.g. groceries just don't last, they have to be sold quickly. Furniture lasts a while. The reality of that natural difference trumps any appeals to logical symmetry in treating corporations the same as households.
We should implement a digital central bank currency and use it to implement a progressive consumption tax. Vats are great.
Corporate profit tax + payroll tax = VAT
Except it's super easy to cheat on the left hand side, but hard to cheat on the right. VAT taxes get paid, payroll taxes get mostly paid, but corporate profit taxes - not so much.
Unfortunately most progressives don't understand this point and keep thinking that corporate profit taxes are good while VATs are bad, and they are kinda confused about payroll taxes.
Then you try to tell them what matters is tax incidence and their heads explode.
Except it's super easy to cheat on the left hand side, but hard to cheat on the right. VAT taxes get paid, payroll taxes get mostly paid, but corporate profit taxes - not so much.
Unfortunately most progressives don't understand this point and keep thinking that corporate profit taxes are good while VATs are bad, and they are kinda confused about payroll taxes.
Then you try to tell them what matters is tax incidence and their heads explode.
If you fear your children you could transfer the assets to someone else?
I was saying, in a world without an estate tax.
If you could remove estate tax and cover by removing step up in cost basis, is probably preferable (but contingent on assets eventually getting sold, requires some research)
If you could remove estate tax and cover by removing step up in cost basis, is probably preferable (but contingent on assets eventually getting sold, requires some research)
For almost every US person, it IS a world without an estate tax. Nobody pays that in 2021 without an estate worth more than US$11.7M
The figure is $2,193,000 for Washington State. Considering that even starter houses are over a million bucks here, I bet that sweeps in quite a bit more than "nobody".
The median house price in Washington State is $450K. If you have another $1.7M in assets when you die, you died rich.
... with rates at most half the 40% being cited here for federal estate tax.
State policies differ, indeed. Almost all discussion of estate taxes in this thread has focused on or been exclusive to the federal estate tax.
State policies differ, indeed. Almost all discussion of estate taxes in this thread has focused on or been exclusive to the federal estate tax.
20% is still far from "a world without an estate tax".
WA state has a population of about 8M. Its citizens decided in 1981 to switch from an inheritance tax to an estate tax.
This citizen-driven state law affects slightly more than 2% of the US population, in theory.
In fact, median household income for WA in 2019 was about $78k, median household net worth in 2019 was about $400k, and median family net worth in WA in 2021 was $865k.
So in reality, even within WA state, almost nobody is paying the state estate tax. Here's the Seattle Times from 2019 on the incongruities in state wealth distribution. But notice that even in their numbers, home owner median net worth is still only $900k, less than half the state's estate tax threshold.
https://www.seattletimes.com/seattle-news/data/seattle-house...
This citizen-driven state law affects slightly more than 2% of the US population, in theory.
In fact, median household income for WA in 2019 was about $78k, median household net worth in 2019 was about $400k, and median family net worth in WA in 2021 was $865k.
So in reality, even within WA state, almost nobody is paying the state estate tax. Here's the Seattle Times from 2019 on the incongruities in state wealth distribution. But notice that even in their numbers, home owner median net worth is still only $900k, less than half the state's estate tax threshold.
https://www.seattletimes.com/seattle-news/data/seattle-house...
The cited article has zero information on what percentage of Washingtonians die with more than $2,000,000 estate value.
Drawing a conclusion that it is "almost nobody" is completely unwarranted.
Drawing a conclusion that it is "almost nobody" is completely unwarranted.
It seems very difficult to find such information. The best I've managed to do so far has been a report from 2006 which stated:
> About 200 estates per year in Washington pay taxes out of 45,000 deaths – less than half of 1%.
http://www.opportunityinstitute.org/wp-content/uploads/tax-r...
It seems likely that this number has increased since 2006. But by how much?
The same report noted total estate tax revenue at $100M. Adjusting for inflation, and using the total revenue number from 2019 ($297M), it would seem that total revenue has just about doubled. If we make the egalitarian but hardly realistic assumption that the gain in total revenue number has been driven by an equally distributed gain in the value of estates, then it seems that a reasonable back of the envelope guestimate is that in 2019 or thereabouts, roughly 1% of annual deaths trigger estate tax liability.
[ EDIT: in addition, this page from the WA OFM seems to show that whatever the revenue from the state estate tax, it is so low that it doesn't even get it's own category in a chart of state revenue sources:
https://ofm.wa.gov/washington-data-research/statewide-data/w... ]
It's not nobody, but it's a hell of a lot closer to "almost nobody" than "this is a government policy that significant numbers of ordinary people have to worry about".
[EDIT: this page from the WA OFM suggests a possibly notable increase for 2019-2021 estate tax revenue, among other increasing sources of revenue. It's not clear that the increase changes the accuracy of my final paragraph (pre-edit)
https://ofm.wa.gov/about/news/2019/09/state-revenue-projecti... ]
> About 200 estates per year in Washington pay taxes out of 45,000 deaths – less than half of 1%.
http://www.opportunityinstitute.org/wp-content/uploads/tax-r...
It seems likely that this number has increased since 2006. But by how much?
The same report noted total estate tax revenue at $100M. Adjusting for inflation, and using the total revenue number from 2019 ($297M), it would seem that total revenue has just about doubled. If we make the egalitarian but hardly realistic assumption that the gain in total revenue number has been driven by an equally distributed gain in the value of estates, then it seems that a reasonable back of the envelope guestimate is that in 2019 or thereabouts, roughly 1% of annual deaths trigger estate tax liability.
[ EDIT: in addition, this page from the WA OFM seems to show that whatever the revenue from the state estate tax, it is so low that it doesn't even get it's own category in a chart of state revenue sources:
https://ofm.wa.gov/washington-data-research/statewide-data/w... ]
It's not nobody, but it's a hell of a lot closer to "almost nobody" than "this is a government policy that significant numbers of ordinary people have to worry about".
[EDIT: this page from the WA OFM suggests a possibly notable increase for 2019-2021 estate tax revenue, among other increasing sources of revenue. It's not clear that the increase changes the accuracy of my final paragraph (pre-edit)
https://ofm.wa.gov/about/news/2019/09/state-revenue-projecti... ]
You don't pay estate taxes in 2021 unless the estate is worth more than US$11.7M
> - Tax capital gains >1m a year as regular income.
It sounds fair, but aren't lower capital gains taxes used to encourage investment? And if we get rid of that incentive on income > $1 million (at least, can they still offset losses?), then would that lead to some adverse consequence (like much lower investment overall as direct income generation becomes preferred at that point)?
It sounds fair, but aren't lower capital gains taxes used to encourage investment? And if we get rid of that incentive on income > $1 million (at least, can they still offset losses?), then would that lead to some adverse consequence (like much lower investment overall as direct income generation becomes preferred at that point)?
I would guess not much reduction in investment. If you have 100m dollars, there's only a limited number of places you can put it. What are you proposing re: direct income generation?
It will lead to reduced liquidity though. E.g. holders of assets are likely to sell less frequently to avoid the higher tax burden.
It will lead to reduced liquidity though. E.g. holders of assets are likely to sell less frequently to avoid the higher tax burden.
> If you have 100m dollars, there's only a limited number of places you can put it.
Stock market is a risky place to put it for sure, especially if the upside is taxed more aggressively.
> What are you proposing re: direct income generation?
They will invest more in private businesses and just take a salary, which is also taxed as income.
Stock market is a risky place to put it for sure, especially if the upside is taxed more aggressively.
> What are you proposing re: direct income generation?
They will invest more in private businesses and just take a salary, which is also taxed as income.
Most wealthy people are likely to own dividend paying stocks, so valuations don't matter as much for risk re the market.
They get paid every quarter by the company, and can just live off of passive distributions.
If they follow what you're proposing, they pay the higher tax rate anyway. But also don't think that's really feasible at very high net worth.
They get paid every quarter by the company, and can just live off of passive distributions.
If they follow what you're proposing, they pay the higher tax rate anyway. But also don't think that's really feasible at very high net worth.
If you move money from one stock market position to an other do you realize your gains? If not, then said investors can simply dump their gains into small new companies that are on the stock market. (Plus see SPACs.)
> Why should capital gains get favorable tax treatment over income
My take on this is that the capital gain was not actually generated all in one year, but by taxing it as ordinary income, you are putting it into a higher bracket as though it were all generated in one year.
As an example, say your father builds a successful company, and runs it well for 40 years before selling it for $10 million and retiring. By taxing the entire $10 million in one tax year, almost all of it is in the highest tax bracket, which is anything above $500,000 for single filers. But the actual average amount earned per year is only $250,000, which doesn’t reach the highest tax bracket at all.
There are ways to balance this, of course, e.g. if you did exactly what I did in my example, and applied the income tax bracket based on the average gain per year of the securities sold. Something like that would still take care of billionaires “paying their fair share,” since you would have to divide by a lot of years to get billions of dollars in gains into a lower tax bracket.
My take on this is that the capital gain was not actually generated all in one year, but by taxing it as ordinary income, you are putting it into a higher bracket as though it were all generated in one year.
As an example, say your father builds a successful company, and runs it well for 40 years before selling it for $10 million and retiring. By taxing the entire $10 million in one tax year, almost all of it is in the highest tax bracket, which is anything above $500,000 for single filers. But the actual average amount earned per year is only $250,000, which doesn’t reach the highest tax bracket at all.
There are ways to balance this, of course, e.g. if you did exactly what I did in my example, and applied the income tax bracket based on the average gain per year of the securities sold. Something like that would still take care of billionaires “paying their fair share,” since you would have to divide by a lot of years to get billions of dollars in gains into a lower tax bracket.
It's in a higher bracket but you're also deferring paying. Given the choice of paying $1 of tax today or paying $N of tax later, that $1 of deferred tax at a 7.18% return is worth $2 in 10 years, $4 in 20 years and $16 in 40 years.
At a 6% rate of return and a 25% tax rate, after 40 years, even a 100% deferred tax rate is financially preferable to a 25% immediate tax rate, ie: I make more from the interest on my deferred tax than on my entire principle.
At a 6% rate of return and a 25% tax rate, after 40 years, even a 100% deferred tax rate is financially preferable to a 25% immediate tax rate, ie: I make more from the interest on my deferred tax than on my entire principle.
"SALT is a direct handout to wealthy homeowners."
The SALT deduction benefits people in high tax states which happen to also be states where democrats hold political power. Many of them ran on restoring the SALT deduction. It benefits states that have high tax rates not exclusively 'wealthy' home owners.
The SALT deduction benefits people in high tax states which happen to also be states where democrats hold political power. Many of them ran on restoring the SALT deduction. It benefits states that have high tax rates not exclusively 'wealthy' home owners.
Texas was the number 4 state for number of SALT deduction claims due to the high property tax.
The vast majority taking the deduction are going to be well off homeowners. But yes for sure, high state income tax and other factors play in as well.
The vast majority taking the deduction are going to be well off homeowners. But yes for sure, high state income tax and other factors play in as well.
Texas is an outlier.
This won't cover the spending at all. Not even close.
There are ~1T in capital gains realized every year, roughly.
If you increase long term rate from 20%, to roughly 40% (top income rate), you'll generate roughly 200B a year in additional revenue. Of course changes in tax law will alter behavior, but we can say likely 100-150B+ per year. We can assume the large majority of these gains are from those above the 1m threshold.
Facebook is doing ~60B in buybacks this year. Taxing that at 20% nets 12B a year in revenue from Facebook alone. Dollar amount of total market buybacks is much higher, obviously. So we can say this likely generates 100B+ per year.
SALT deduction alone costs 100B/year to reinstate
So how does 300-450B a year not cover a 1.5T spending bill over 10 years?
What logic are you using to assert this isn't sufficient? Or are you just writing it off without any research?
If you increase long term rate from 20%, to roughly 40% (top income rate), you'll generate roughly 200B a year in additional revenue. Of course changes in tax law will alter behavior, but we can say likely 100-150B+ per year. We can assume the large majority of these gains are from those above the 1m threshold.
Facebook is doing ~60B in buybacks this year. Taxing that at 20% nets 12B a year in revenue from Facebook alone. Dollar amount of total market buybacks is much higher, obviously. So we can say this likely generates 100B+ per year.
SALT deduction alone costs 100B/year to reinstate
So how does 300-450B a year not cover a 1.5T spending bill over 10 years?
What logic are you using to assert this isn't sufficient? Or are you just writing it off without any research?
You need to start putting realistic numbers. First off, if you double the tax rate on capital gains you'll see a dramatic change in behavior. You're not going to capture 75% of the expected, maybe half that. Instead of companies issuing equity, they'll just issue debt instead if it has clear tax advantages for investors.
Stock buy backs will end, they'll just pay it out as dividends instead. So $0.
SALT deduction has already been capped, no change there.
It's like the wealth tax in France that they expected would bring in billions brought in a few percentage of that.
Stock buy backs will end, they'll just pay it out as dividends instead. So $0.
SALT deduction has already been capped, no change there.
It's like the wealth tax in France that they expected would bring in billions brought in a few percentage of that.
I explicitly stated in my response that behavior would change in response to tax policy changes. Why state that as if I didn't lead with that?
There's 0 chance that capital gains will drop from 1T to much less than 500B, or that buybacks go to 0. You think people will suddenly never sell their assets because the tax rate is higher?
Dividends are already taxed at 20% for most people, yet companies still pay dividends. So why wouldn't they do buybacks at a 20% tax rate?
Even if you cut projections in half, it's more than enough to fund.
And it seems like you're not aware of the legislation. The budget bill brings back the SALT deduction, which will reduce tax revenue by 100B/year.
That single provision alone is almost enough to fully fund the (pared down) bill.
There's 0 chance that capital gains will drop from 1T to much less than 500B, or that buybacks go to 0. You think people will suddenly never sell their assets because the tax rate is higher?
Dividends are already taxed at 20% for most people, yet companies still pay dividends. So why wouldn't they do buybacks at a 20% tax rate?
Even if you cut projections in half, it's more than enough to fund.
And it seems like you're not aware of the legislation. The budget bill brings back the SALT deduction, which will reduce tax revenue by 100B/year.
That single provision alone is almost enough to fully fund the (pared down) bill.
Buybacks would absolutely go to 0. If a company has the option to return 100% of their net income through dividends or 80% of their net income through buybacks, why on earth would they do buybacks?
US has the same top marginal dividend and cap gains rate so you'd make dividends much more tax efficient as a way to return money to investors [0].
[0]: https://en.wikipedia.org/wiki/Share_repurchase#Tax-efficient...
US has the same top marginal dividend and cap gains rate so you'd make dividends much more tax efficient as a way to return money to investors [0].
[0]: https://en.wikipedia.org/wiki/Share_repurchase#Tax-efficient...
Qualified dividends are taxed as long term capital gains, which is 20% for most. So if you have a 10% buyback tax, they are still more tax efficient than dividends. A 20% buyback tax puts them roughly at par.
Dividends are "double taxed" today and buybacks are not.
Not sure where you got your information, but it's wrong. Your source confirms what I'm saying, so maybe try reading it again.
Dividends are "double taxed" today and buybacks are not.
Not sure where you got your information, but it's wrong. Your source confirms what I'm saying, so maybe try reading it again.
No it does not because the person who they buy the stock back from has to pay cap gains still. The wiki page even has an example of how a dividend effectively reduces the shares price whereas buybacks effectively transfer the money into the share price which raises it over time proportionally and you will have to pay cap gains on it when you do sell.
They pay the capital gain at some point, but the most wealthy tend to never sell. They tend to take loans against their assets and hold in perpetuity.
I agree that raising the value of the share leads to a deferred taxable event, just a question of whether that deferral is permanent or not.
Presumably it would be realized at some point.
There is also a compounding effect to deferring gains, which leads to higher wealth concentration. e.g. you make gains on the portion of your investment that would be taxed, because dont owe the tax until you sell.
I agree that raising the value of the share leads to a deferred taxable event, just a question of whether that deferral is permanent or not.
Presumably it would be realized at some point.
There is also a compounding effect to deferring gains, which leads to higher wealth concentration. e.g. you make gains on the portion of your investment that would be taxed, because dont owe the tax until you sell.
Money will shift from capital gains to other investments. Same with buybacks. I mean, that's why company's do buybacks today, they are tax advantaged.
And I don't get why you'd tax stock buyback. That's a key way company's control their equity. Take $10B to buy $10B of their own stock and you'd make them pay $2B in taxes? Really?
And I don't get why you'd tax stock buyback. That's a key way company's control their equity. Take $10B to buy $10B of their own stock and you'd make them pay $2B in taxes? Really?
Why tax anything? The free market always works better without taxes altering behaviors.
The reason you tax buybacks is because you presumably care about wealth inequality. Buybacks by and large are mechanisms to increase the wealth of shareholders in a tax deferred manner. Dividends are not tax deferred.
Ideally legislation would differentiate between "operational buybacks" where the buyback is actually justified by fundamentals and "indiscriminate buybacks" where the goal is to increase the value of the equity regardless of efficiency of the buyback. If a company has ROIC of 20% and a cashflow yield of 3%, it's pretty obvious that the buyback is indiscriminate and not rooted in any sense of the best allocation of capital.
Of course impossible to differentiate these two things in legislation. But we can say 90% of the money allocated towards buybacks has nothing to do with operational efficiency, and acts more as a tax deferred transfer of wealth to shareholders. From the governments perspective, encouraging dividends over buybacks makes a lot of sense.
The reason you tax buybacks is because you presumably care about wealth inequality. Buybacks by and large are mechanisms to increase the wealth of shareholders in a tax deferred manner. Dividends are not tax deferred.
Ideally legislation would differentiate between "operational buybacks" where the buyback is actually justified by fundamentals and "indiscriminate buybacks" where the goal is to increase the value of the equity regardless of efficiency of the buyback. If a company has ROIC of 20% and a cashflow yield of 3%, it's pretty obvious that the buyback is indiscriminate and not rooted in any sense of the best allocation of capital.
Of course impossible to differentiate these two things in legislation. But we can say 90% of the money allocated towards buybacks has nothing to do with operational efficiency, and acts more as a tax deferred transfer of wealth to shareholders. From the governments perspective, encouraging dividends over buybacks makes a lot of sense.
I am confused as to how you would tax share buybacks.
Also, would you give a credit for share issuance?
1) if company A issues 100 shares in January, and buys back 150 shares in February, then would company A accrue a tax liability on 50 shares, or 150 shares, and how does A's tax liability change? What rate does the liability accrue at? What if it's more than 12 months -- can you bank this somehow?
2) if company A lends $100 to company B, and company B buys $100 worth of company A's shares, then would company B incur a tax liability, and if so, what is the liability?
3) Is this a general tax liability incurred when a company buys shares of any other company?
4) Is this a general tax liability incurred whan a company buys other instruments -- preferred stock, long term debt, etc, of any other company?
5) Does this tax on corporate purchase of financial assets also extend to banks or is it just the non-financial sector?
6) What if a hedge fund buys shares in company A, do they incur a tax liability?
7) Is a company allowed to retire its own debt prematurely under this plan without incurring a tax liability?
8) Can a company do a repo or reverse-repo of its own shares without incurring a tax liability?
9) If instead of buying back its own shares, a company were to buy gold or shares in another company, would that trigger a tax liability?
Thanks!
Also, would you give a credit for share issuance?
1) if company A issues 100 shares in January, and buys back 150 shares in February, then would company A accrue a tax liability on 50 shares, or 150 shares, and how does A's tax liability change? What rate does the liability accrue at? What if it's more than 12 months -- can you bank this somehow?
2) if company A lends $100 to company B, and company B buys $100 worth of company A's shares, then would company B incur a tax liability, and if so, what is the liability?
3) Is this a general tax liability incurred when a company buys shares of any other company?
4) Is this a general tax liability incurred whan a company buys other instruments -- preferred stock, long term debt, etc, of any other company?
5) Does this tax on corporate purchase of financial assets also extend to banks or is it just the non-financial sector?
6) What if a hedge fund buys shares in company A, do they incur a tax liability?
7) Is a company allowed to retire its own debt prematurely under this plan without incurring a tax liability?
8) Can a company do a repo or reverse-repo of its own shares without incurring a tax liability?
9) If instead of buying back its own shares, a company were to buy gold or shares in another company, would that trigger a tax liability?
Thanks!
Another problem with taxing unrealized capital gains is that if the gov’t wants to collect more tax revenue, they could print money, inflate the dollar value of assets, then tax the gains.
Basically what’s happening right now?
> Why should capital gains get favorable tax treatment over income
Because the income has already been taxed when it was the corporation's profit.
Because the income has already been taxed when it was the corporation's profit.
Even if I was to buy that there's some theoretical argument that no dollar may be taxed more than once (which I don't), the income isn't the capital gains. It's not related in any way to the capital gains. A corporation may have enormous profits, and zero capital gains. It may have enormous capital gains, and zero profits. The capital gain has not been previously taxed.
The value of a corporation is inevitably linked to its profits.
Not really. Amazon, a company I once knew a bit about, showed gigantic growth in stock value with minimal or zero profit. This is hardly a new story.
But it wouldn't matter anyway, given GP's point. Taxes on corporate income are not taxes on the capital gains of those who hold corporate stock.
But it wouldn't matter anyway, given GP's point. Taxes on corporate income are not taxes on the capital gains of those who hold corporate stock.
I know about the Amazon case. The stock price was linked to expected future profits. Which will be taxed.
The stock price can deviate for a time from the current profits, but it will inevitably move back to what the overall profit is.
The reason is simple. The gains in value of a company are when (revenue > expenses), i.e. it comes from profit.
> Taxes on corporate income are not taxes on the capital gains of those who hold corporate stock.
Yes they are, because they reduce the value of the stock (and hence the capital gains) by the same amount. There's no free lunch.
The stock price can deviate for a time from the current profits, but it will inevitably move back to what the overall profit is.
The reason is simple. The gains in value of a company are when (revenue > expenses), i.e. it comes from profit.
> Taxes on corporate income are not taxes on the capital gains of those who hold corporate stock.
Yes they are, because they reduce the value of the stock (and hence the capital gains) by the same amount. There's no free lunch.
This is a deeply simplistic reading of stock trading.
People who buy (or used to buy) "blue chip" stocks in the hope of collecting a nice monthly dividend payout certainly see things the way you're describing.
But there are plenty of people who buy stock because they believe the stock price will increase for reasons that may or may not include profits. The idea that "gains in value of a company ... comes from profit" is some sort of glorified 1850-1970s view of how stock prices vary. Once we allowed for derivatives, amongst other things, this sort of simplistic approach to stock trading has become more and more of an anachronism.
To use amzn as an example, though they are hardly unique, lots of people bought amzn stock because they belived that other people believed that the stock price would increase.
We have entire sub-sectors of stock trading that use high level math and leading edge technology (and or day-trader gut feelings) to try to earn from fluctuations in stock pricing that are best a derivative of profits, but more typically 3rd order effects.
People who buy (or used to buy) "blue chip" stocks in the hope of collecting a nice monthly dividend payout certainly see things the way you're describing.
But there are plenty of people who buy stock because they believe the stock price will increase for reasons that may or may not include profits. The idea that "gains in value of a company ... comes from profit" is some sort of glorified 1850-1970s view of how stock prices vary. Once we allowed for derivatives, amongst other things, this sort of simplistic approach to stock trading has become more and more of an anachronism.
To use amzn as an example, though they are hardly unique, lots of people bought amzn stock because they belived that other people believed that the stock price would increase.
We have entire sub-sectors of stock trading that use high level math and leading edge technology (and or day-trader gut feelings) to try to earn from fluctuations in stock pricing that are best a derivative of profits, but more typically 3rd order effects.
Once again, if the stock price outpaces profits, it is because the investors are expecting FUTURE profits.
You appear to believe that this is some anachronism. It is not. The people who believe it is not based on (expected future) profits are in for a rude awakening. If the expected future profits don't materialize, the stock tanks.
Why do you think TSLA jumped when Hertz ordered a ton of Teslas? It wasn't based on the value of that deal, it was based on the EXPECTED FUTURE PROFITS from the legitimizing effect on Tesla sales from Hertz' vote of confidence. People expect other rental fleets to now be buying Teslas. And those expected future profits just got priced in to the stock.
Of course, they could guess wrong. But the two numbers, stock valuation and profits, will inevitably converge.
ANY news that affects future profits is going to affect the stock price. All those mathematical models are just attempts to predict just what the magnitude of those effects will be.
Not realizing this is like looking at the thermometer today and drawing a conclusion about climate change.
You appear to believe that this is some anachronism. It is not. The people who believe it is not based on (expected future) profits are in for a rude awakening. If the expected future profits don't materialize, the stock tanks.
Why do you think TSLA jumped when Hertz ordered a ton of Teslas? It wasn't based on the value of that deal, it was based on the EXPECTED FUTURE PROFITS from the legitimizing effect on Tesla sales from Hertz' vote of confidence. People expect other rental fleets to now be buying Teslas. And those expected future profits just got priced in to the stock.
Of course, they could guess wrong. But the two numbers, stock valuation and profits, will inevitably converge.
ANY news that affects future profits is going to affect the stock price. All those mathematical models are just attempts to predict just what the magnitude of those effects will be.
Not realizing this is like looking at the thermometer today and drawing a conclusion about climate change.
> Once again, if the stock price outpaces profits, it is because the investors are expecting FUTURE profits.
This is just false. We live in a world where stock trading occurs based on at least 3rd order derivatives. My belief about her belief about his belief can drive me buying or selling stock.
I don't have to believe anything about future profits, I only have to believe that you believe that somebody else believes something about future profits.
But I don't even have to believe that. I can simply have an expectation that I can surf the volatility of a given stock, without regard for its "underlying causes", and make a profit doing so.
You don't actually think all those hedge fund quants do is some fancy computation of expected future profit, do you?
> The people who believe it is not based on (expected future) profits are in for a rude awakening. If the expected future profits don't materialize, the stock tanks.
The people who are no longer playing the simplistic game are already gone when that happens.
This is just false. We live in a world where stock trading occurs based on at least 3rd order derivatives. My belief about her belief about his belief can drive me buying or selling stock.
I don't have to believe anything about future profits, I only have to believe that you believe that somebody else believes something about future profits.
But I don't even have to believe that. I can simply have an expectation that I can surf the volatility of a given stock, without regard for its "underlying causes", and make a profit doing so.
You don't actually think all those hedge fund quants do is some fancy computation of expected future profit, do you?
> The people who believe it is not based on (expected future) profits are in for a rude awakening. If the expected future profits don't materialize, the stock tanks.
The people who are no longer playing the simplistic game are already gone when that happens.
BTW, hedge fund trading is all about finding an edge based on:
1. executing a trade on breaking news ahead of the other guys
2. finding an unknown correlation between Event A and the stock price
The thing about (2) is once someone does find a correlation, that knowledge spreads out to the other hedge fundies, negating the advantage.
And then it's back to future profits. It always goes back to future profits. Bill Gates was asked once if he followed MSFT. He replied that he didn't, he just focused on making Microsoft profits and MSFT took care of itself.
I also remember a CEO who said at a company meeting that he'd adjusted the books to "what Wall Street was looking for". The stock promptly tanked. WS wants profits, not manipulation.
P.S. did you see what MSFT did yesterday? It jumped up quite a bit. Because of profits beating expectations. Not because of a 3rd derivative.
1. executing a trade on breaking news ahead of the other guys
2. finding an unknown correlation between Event A and the stock price
The thing about (2) is once someone does find a correlation, that knowledge spreads out to the other hedge fundies, negating the advantage.
And then it's back to future profits. It always goes back to future profits. Bill Gates was asked once if he followed MSFT. He replied that he didn't, he just focused on making Microsoft profits and MSFT took care of itself.
I also remember a CEO who said at a company meeting that he'd adjusted the books to "what Wall Street was looking for". The stock promptly tanked. WS wants profits, not manipulation.
P.S. did you see what MSFT did yesterday? It jumped up quite a bit. Because of profits beating expectations. Not because of a 3rd derivative.
Despite having a good chunk of my "retirement" money in the market, I try to avoid paying much attention to it's day to day issues. So no, I did not see what happened to MSFT.
But look, the point is that there are two fundamental reasons to buy a stock. One is to collect dividends paid to stock owners (so called "blue chip" stocks). The other is because you believe the price of the stock will rise. (For the big players, there's also the issue of corporate control, but that's not a factor for most investors, even many institutional ones)
There are many reasons why the price of a stock will rise. One of them could be more people wanting in on the dividend payout, and them being willing to pay (a bit) more than the current price. That could happen due to demographic changes (ie. shifts in the number of people who want dividend paying stocks), it could happen due to a change in the expectation of what those dividends will be (as in your MSFT example).
But it can also (and demonstrably has) happen(ed) that the price rises because derivative beliefs about the likely future price. And that's precisely what happened in the case of amzn and dozens if not hundreds of tech startups over decades: there was never any profit (and in some cases there never would be any profit), but there was a belief about either:
But look, the point is that there are two fundamental reasons to buy a stock. One is to collect dividends paid to stock owners (so called "blue chip" stocks). The other is because you believe the price of the stock will rise. (For the big players, there's also the issue of corporate control, but that's not a factor for most investors, even many institutional ones)
There are many reasons why the price of a stock will rise. One of them could be more people wanting in on the dividend payout, and them being willing to pay (a bit) more than the current price. That could happen due to demographic changes (ie. shifts in the number of people who want dividend paying stocks), it could happen due to a change in the expectation of what those dividends will be (as in your MSFT example).
But it can also (and demonstrably has) happen(ed) that the price rises because derivative beliefs about the likely future price. And that's precisely what happened in the case of amzn and dozens if not hundreds of tech startups over decades: there was never any profit (and in some cases there never would be any profit), but there was a belief about either:
1. that future profit would be above a certain level
2. the number of people who believed in 1, and so would drive the price up
3. the number of people who believed in 2, and so would drive the price up
4. [ repeat as deep as you think feasible ]
Again, it all boils down to expectation of future profit.
It makes no difference (except for tax purposes) if the dividends are paid to shareholders, or if they are retained and the stock price goes up by the amount of the dividend. As the differing tax treatment of capital gains and dividends changes, companies change their dividend payouts to match.
> But it can also (and demonstrably has) happen(ed) that the price rises because derivative beliefs about the likely future price. And that's precisely what happened in the case of amzn
The future price reflects expectation of profit. Amazon actually creates quite a bit of profit, they just plow it back into the business.
It makes no difference (except for tax purposes) if the dividends are paid to shareholders, or if they are retained and the stock price goes up by the amount of the dividend. As the differing tax treatment of capital gains and dividends changes, companies change their dividend payouts to match.
> But it can also (and demonstrably has) happen(ed) that the price rises because derivative beliefs about the likely future price. And that's precisely what happened in the case of amzn
The future price reflects expectation of profit. Amazon actually creates quite a bit of profit, they just plow it back into the business.
> This is just false
What do you imagine it is based on? Collector value? The position of Mars in the sky?
> I can surf the volatility of a given stock
You can make a profit in Vegas with your system, too, but you'll lose in the long run because the math is inevitable.
> You don't actually think all those hedge fund quants do is some fancy computation of expected future profit, do you?
Hedge fund long term results struggle to match the S&P 500. The owners of the hedge fund, however, do far better than their customers. All those commissions, fees, percentages and loads.
I put my money where my mouth is, and it's not in hedge funds.
> are already gone when that happens
2008 Oops!
What do you imagine it is based on? Collector value? The position of Mars in the sky?
> I can surf the volatility of a given stock
You can make a profit in Vegas with your system, too, but you'll lose in the long run because the math is inevitable.
> You don't actually think all those hedge fund quants do is some fancy computation of expected future profit, do you?
Hedge fund long term results struggle to match the S&P 500. The owners of the hedge fund, however, do far better than their customers. All those commissions, fees, percentages and loads.
I put my money where my mouth is, and it's not in hedge funds.
> are already gone when that happens
2008 Oops!
So should my income spent on clothes be exempt from sales tax?
And if not, why not?
And if not, why not?
Well, one workaround would be to treat securitization of shares (eg for a loan) as a taxable event. This is a common (and currently legal) tax avoidance strategy.
Another consideration is that maybe having sole control of a massive pot of cash or financial instruments by an individual is just a Bad Thing. Consider how Zuckerberg structured FB so that while he it's a public company, the bulk of the stock is non-voting so he has de facto sole control of the firm. No matter how destructive of shareholder value or public goods his executive decisions, it's virtually impossible for anyone else to overturn them barring some novel legal line of attack.
I have no particular feelings about Tim Sweeney/Epic, but would the economy or the gaming world be worse off if he no longer had founder control? If he's great at his job I presume shareholders would want to keep him on as CEO and would compensate him handsomely in cash money.
Another consideration is that maybe having sole control of a massive pot of cash or financial instruments by an individual is just a Bad Thing. Consider how Zuckerberg structured FB so that while he it's a public company, the bulk of the stock is non-voting so he has de facto sole control of the firm. No matter how destructive of shareholder value or public goods his executive decisions, it's virtually impossible for anyone else to overturn them barring some novel legal line of attack.
I have no particular feelings about Tim Sweeney/Epic, but would the economy or the gaming world be worse off if he no longer had founder control? If he's great at his job I presume shareholders would want to keep him on as CEO and would compensate him handsomely in cash money.
> Well, one workaround would be to treat securitization of shares (eg for a loan) as a taxable event. This is a common (and currently legal) tax avoidance strategy.
agreed. that should 100% be a taxable event and it's totally absurd that it's not. and i'm sure there's a lot of... lobbying that will never allow that kind of law to pass.
agreed. that should 100% be a taxable event and it's totally absurd that it's not. and i'm sure there's a lot of... lobbying that will never allow that kind of law to pass.
I kinda disagree. Yes it's a loophole to get around tax, but taking a loan against assets you own should not be taxable. It's the same pathway that people use to take a loan against their property and other assets, and having to pay tax on that is absurd
Similarly, stocks (or things like gold) that one owns have some worth, and using it as collateral for taking a loan against it is a completely valid thing to do
Similarly, stocks (or things like gold) that one owns have some worth, and using it as collateral for taking a loan against it is a completely valid thing to do
>It's the same pathway that people use to take a loan against their property and other assets, and having to pay tax on that is absurd
you bought house for $600K cash (for simplicity). Some years later the house appreciated to $1.5M, and you take out a $1M loan against it - you are obviously realizing a $400K of the value of the house as otherwise those additional $400K can only come from thin air. So those $400K of the realized value of the house (not the loan) need to be taxed with the house adjusted cost basis becoming $1M. If you sell the house later for $1.5M the remaining $500K would get taxed as the difference between sale proceeds and the adjusted cost basis.
you bought house for $600K cash (for simplicity). Some years later the house appreciated to $1.5M, and you take out a $1M loan against it - you are obviously realizing a $400K of the value of the house as otherwise those additional $400K can only come from thin air. So those $400K of the realized value of the house (not the loan) need to be taxed with the house adjusted cost basis becoming $1M. If you sell the house later for $1.5M the remaining $500K would get taxed as the difference between sale proceeds and the adjusted cost basis.
Just put a reasonable threshold on it.
Any assets, above $100M, used to collateralize a loan are taxed as if they are realized capital gains at the time that you collateralize the loan.
I don't think the loan itself should be taxed, but if you use assets to collateralize a loan, those assets should be taxed as if they're realized income—since by taking the loan you are now "realizing" the value of those appreciating assets.
Any assets, above $100M, used to collateralize a loan are taxed as if they are realized capital gains at the time that you collateralize the loan.
I don't think the loan itself should be taxed, but if you use assets to collateralize a loan, those assets should be taxed as if they're realized income—since by taking the loan you are now "realizing" the value of those appreciating assets.
Honestly, maybe people should pay taxes on that. Remember, it only applies to the gain in value, so loans up to the original purchase price would not be taxed. The tax is assessed based on the maximum collateralization minus the purchase price and minus any value previously taxed as a capital gain, as I understand it. In a practical sense, they have gained spending power they wouldn't have otherwise.
> Similarly, stocks (or things like gold) that one owns have some worth, and using it as collateral for taking a loan against it is a completely valid thing to do
It's how the entire banking system works. Taking out loans against collateral deposited in the bank.
People also take out a loan every time they use a credit card. Is that income, too?
It's how the entire banking system works. Taking out loans against collateral deposited in the bank.
People also take out a loan every time they use a credit card. Is that income, too?
No, a credit card isn't collaterizing an asset because it's unsecured.
Try not paying your credit card debt and see what happens :-/
They'll come after your assets. And it's very hard to get a credit card without assets.
They'll come after your assets. And it's very hard to get a credit card without assets.
That doesn’t make any sense, presuming you meant “collateralize.”
I put up $100k of stock for a $100k loan, I do nothing, turn around and pay the money back, and now I have a tax bill? If I repeat this process, I can have an infinite tax liability with no realized gain or net income. Am I missing something?
I put up $100k of stock for a $100k loan, I do nothing, turn around and pay the money back, and now I have a tax bill? If I repeat this process, I can have an infinite tax liability with no realized gain or net income. Am I missing something?
No, the tax bill would come with an adjustment of cost basis. The second time there's no change in value so no tax bill.
The “repeating the process” is entirely the problem. If you perpetually roll over your loans you are able to spend large amounts of money without ever realizing a cent of it, thus never paying taxes (since your estate would end up paying it but then financial trickery makes the realization there non taxable).
It would be easy to avoid this infinite tax liability by not taking out an infinite amount of loans…
It would be easy to avoid this infinite tax liability by not taking out an infinite amount of loans…
The problem here is with the step up in cost basis upon death, not getting loans against unrealized shares.
Don't overlook the estate tax.
You missed the part where I said you pay the loan back. You know, like all loans.
[deleted]
You can presumably adjust this for how much money you actually took out. If you got a line of credit on your house/stocks, but you didn't take out a cent, then you don't owe anything. If you took out 10% of your portfolio value in cash, and the LTV ratio was 50% (that is, you can borrow up to 50% of your portfolio's value), then you're deemed to have sold 20% of your portfolio and have to pay capital taxes. You're free to play around with the parameters when it comes to how the capital gains are calculated (eg. tax lot, which stock was "sold").
And then you pay back the loan (worth 10% of your portfolio.) So now you've been taxed for what exactly? Having access to a pile of cash for some temporary period that expired? It makes no sense to me. We don't tax you on the principal of a loan since it's not income, its debt.
[deleted]
[deleted]
The theoretical ability to create an infinite tax liability isn't an issue because people just won't do that.
Also, you only tax people in this way if they're over a certain level of net worth/income.
Also, you only tax people in this way if they're over a certain level of net worth/income.
It does seem like a loophole, such funds when used as income should be taxed. Probably more complicated in practice but it does seem like a strategy that runs counter to the intent of taxation laws.
And I'd bet if it was a strategy employed effectively by the 99% it would be vigorously labelled as tax evasion and dealt with accordingly
And I'd bet if it was a strategy employed effectively by the 99% it would be vigorously labelled as tax evasion and dealt with accordingly
This is not a loophole. Collateralizing a loan against assets does not produce income. It produces cash and an even larger liability.
That loan still has to be paid off with separate, regularly taxed, income.
Also this is a strategy used all the time by the 99%. It's called a second mortgage. This proposal would mean that taking out a loan against the equity in a home would become a taxable event.
That loan still has to be paid off with separate, regularly taxed, income.
Also this is a strategy used all the time by the 99%. It's called a second mortgage. This proposal would mean that taking out a loan against the equity in a home would become a taxable event.
I don't think anyone's arguing people should be taxed twice.
What they are arguing is that individuals should be taxed at the event of first utility (that is, realizing value from the gains). And then the tax is paid, so not paid again, or offset, later.
And what we're really talking about here is individuals using equity loans for the majority of their income.
What they are arguing is that individuals should be taxed at the event of first utility (that is, realizing value from the gains). And then the tax is paid, so not paid again, or offset, later.
And what we're really talking about here is individuals using equity loans for the majority of their income.
Of course it's a loophole. Elon Musk takes essentially no salary, never sells his shares yet lives the life of a workaholic billionaire. The only reason he has any taxes at all is because he is taxed on his stock grants. He also has > $1B in debt.
The first $500K in residential capital gains aren't taxable. I sure hope your second mortgage is less than that.
Taxing the securitization of assets should cause a step up in the base cost of the asset. So it doesn't reduce the amount of tax you owe, it just changes when you owe it. (Unless you avoid the tax by dying).
The first $500K in residential capital gains aren't taxable. I sure hope your second mortgage is less than that.
Taxing the securitization of assets should cause a step up in the base cost of the asset. So it doesn't reduce the amount of tax you owe, it just changes when you owe it. (Unless you avoid the tax by dying).
I doubt SpaceX or Tesla would exist if they were controlled by a committee. Doing great things usually requires control by a single person who is able to say "screw it, we're going for X".
This is simply nonsense.
All companies once they reach a certain size (including Tesla, SpaceX) have a Senior Leadership Team which decides on the critical decisions affecting the company.
This personality obsession is really only perpetuated by people who haven't worked in business and don't realise just how much of a team effort it is.
All companies once they reach a certain size (including Tesla, SpaceX) have a Senior Leadership Team which decides on the critical decisions affecting the company.
This personality obsession is really only perpetuated by people who haven't worked in business and don't realise just how much of a team effort it is.
The thing is, it's really critical to have that <strike>dictator</strike>CEO in charge of the company to reign in the senior leadership, otherwise what happens is the creation of fiefdoms and <strike>intra-oligarchic</strike>turf battles at the expense of overall success.
Someone on this site mentioned Pournelle's Iron Law of Bureaucracy: https://en.wikipedia.org/wiki/Jerry_Pournelle#Pournelle's_ir...
And the CEO is the counterweight to that oligarchic rule. You see this, for example, in the constant battles that kings wage against the nobility.
Someone on this site mentioned Pournelle's Iron Law of Bureaucracy: https://en.wikipedia.org/wiki/Jerry_Pournelle#Pournelle's_ir...
And the CEO is the counterweight to that oligarchic rule. You see this, for example, in the constant battles that kings wage against the nobility.
I've been in companies that became founder led to professional CEO led, and you can see the difference in how effective a company is. I think there is great shareholder value also in founder led companies too, which have led to the growth of some of the largest and most successful companies in the world. When gates left microsoft was probably the begining of the company becoming somewhat irrellevant. Apple, tesla, epic, facebook, google, etc are all great examples of this.
There is a really great possibility that america shoots it's future economic growth in the foot with something like this, just because it's future superstars companies are not led by their great founders.
There is a really great possibility that america shoots it's future economic growth in the foot with something like this, just because it's future superstars companies are not led by their great founders.
The Space Shuttle is what happens with design by committee.
> nonsense
May I present Steve Jobs, another obvious example? Ray Croc who built McDonald's from a single location into a world empire.
May I present Steve Jobs, another obvious example? Ray Croc who built McDonald's from a single location into a world empire.
Steve Jobs, who became CEO when Apple, as a public company, hired him from outside the company?
Who literally saved Apple from their attempted corporate suicide? Yeah, I think he is a good example of why you need a strong founder sometimes.
I think their point is that you can have a strong leader that doesn't have control of the company through ownership mechanism.
Steve Jobs at Apple is a perfect example, since it was a publicly traded company that Steve Jobs didn't control. However, he was still able to be an extremely effective leader as the CEO.
Steve Jobs at Apple is a perfect example, since it was a publicly traded company that Steve Jobs didn't control. However, he was still able to be an extremely effective leader as the CEO.
He had de facto control. Nobody was able to successfully defy him. He used this control to force his vision upon Apple. No committee would have done what he did.
That's... not the point at all? This post is about a law that (to Sweeney's claim) would force founders to sell their controlling stock. This law wouldn't affect "de facto" control of a company -- it would affect actual stock-driven control of a company. The fact that Jobs did not have stock-driven control of Apple, and yet he was still able to "force his vision upon Apple" as you said, would make him a good example of why this law could be effective, since this law would not have affected Jobs' control of Apple.
Right, that's exactly my point!
It's possible to be CEO, and exert control over a company without literally owning >51% of the voting shares.
A good leader can "control" a company without having legal control over it. That's exactly the point about Steve Jobs.
The assertion is that: It is possible to be a dictatorial executive CEO, without having 51% of the voting rights of the company. This is the corollary of "losing control of the voting rights of the company doesn't automatically imply that the company must be run by committee". Steve Jobs proves both of those assertions to be true.
It's possible to be CEO, and exert control over a company without literally owning >51% of the voting shares.
A good leader can "control" a company without having legal control over it. That's exactly the point about Steve Jobs.
The assertion is that: It is possible to be a dictatorial executive CEO, without having 51% of the voting rights of the company. This is the corollary of "losing control of the voting rights of the company doesn't automatically imply that the company must be run by committee". Steve Jobs proves both of those assertions to be true.
I worked at Apple when Steve Jobs was there. Yes he's amazing.
But people like Avie Tevanian, Tim Cook, Bertrand Serlet, Bob Mansfield, Johnny Ive, Dan Riccio etc. all played critical roles in turning Apple around.
iPhone simply isn't a success without all of the above functioning at a high level.
But people like Avie Tevanian, Tim Cook, Bertrand Serlet, Bob Mansfield, Johnny Ive, Dan Riccio etc. all played critical roles in turning Apple around.
iPhone simply isn't a success without all of the above functioning at a high level.
Of course those people helped.
But there's no doubt who was in charge and who set the direction. From everything I've read about Apple, it was Jobs who was in command, and everyone else followed.
But there's no doubt who was in charge and who set the direction. From everything I've read about Apple, it was Jobs who was in command, and everyone else followed.
Well I would suggesting looking a bit more into the company.
Because it's never been the case that Steve Jobs was in charge and everyone just fell in line. It's always been consultative and has always been the leadership team making the decisions. It's in fact how most companies run.
Especially given Steve was not 100% during most of his time at Apple.
Because it's never been the case that Steve Jobs was in charge and everyone just fell in line. It's always been consultative and has always been the leadership team making the decisions. It's in fact how most companies run.
Especially given Steve was not 100% during most of his time at Apple.
The point is there has to be someone to make the final decisions, be they talented or not. You could vote on everything, but I don't think that would be efficient or even make sense for all circumstances.
But what does that have to do with that person having a majority interest in the company?
Hard disagree.
A senior leadership team without a key decision maker is fundamentally lost and seeks only self preservation through short term goals.
Here's another example: every government on Earth. All have a single key decision maker at the top. In democracies they can be kicked out, but they have total control while they're in power.
A senior leadership team without a key decision maker is fundamentally lost and seeks only self preservation through short term goals.
Here's another example: every government on Earth. All have a single key decision maker at the top. In democracies they can be kicked out, but they have total control while they're in power.
[deleted]
> Here's another example: every government on Earth. All have a single key decision maker at the top.
No, they don't. A system with a council with a chair with no significant additional decisionmaking power over other members is not unheard of.
No, they don't. A system with a council with a chair with no significant additional decisionmaking power over other members is not unheard of.
> All have a single key decision maker at the top. In democracies they can be kicked out, but they have total control while they're in power
This isn't remotely correct.
a) All democracies I can think of are derived from the Westminister system where there are branches of government e.g. House/Senate who need to agree to get laws passed. Pretty far from total control as Biden is experiencing now.
b) Many democracies e.g. Australia don't have the PM/President be directly elected and instead are appointed by the winning party. Thus their power and control is limited to what is gifted by the party and can be withdrawn at any time at which point a new leader is appointed. Again pretty far from total control.
This isn't remotely correct.
a) All democracies I can think of are derived from the Westminister system where there are branches of government e.g. House/Senate who need to agree to get laws passed. Pretty far from total control as Biden is experiencing now.
b) Many democracies e.g. Australia don't have the PM/President be directly elected and instead are appointed by the winning party. Thus their power and control is limited to what is gifted by the party and can be withdrawn at any time at which point a new leader is appointed. Again pretty far from total control.
They tend to stagnate after the founder leaves.
any actual data to back that up? Looking at the top 50 American businesses by market cap probably 90%+ aren't run by founders, and plenty of the largest ones have continued to grow just fine. Apple, Microsoft just two name to trillion dollar businesses.
Also look at the top 50 businesses and how many still have founder control. In none of them does the founder still control 50% of the stock, and only a few of them (at least Facebook and Google) do the founder(s) control over 50% of the voting stock.
For example, Bezos only owns 16% of the voting stock of Amazon, Musk only owns 22% of the voting stock of Tesla yet neither are in any danger.
For example, Bezos only owns 16% of the voting stock of Amazon, Musk only owns 22% of the voting stock of Tesla yet neither are in any danger.
Yes, they do not have a controlling stake (50%+1) but both Bezos and Musk are the largest shareholders in their respective companies wielding huge influence.
I don't think your first sentence was necessary.
it makes it all the more important to decide who you get funding from too, since control dissipates more. this would be interesting.
Bring back kings!
Elon Musk controls less than 25% of the voting shares of Tesla, yet the company still exists and in fact is thriving.
How many shares of Apple did Steve Jobs control when he was the CEO?
This is just a ridiculous argument that companies can only succeed if the Founders/CEOs have absolute voting control. There are many examples of shareholders being more than happy to put their votes behind whatever the CEO wants as long as they believe in the CEO.
How many shares of Apple did Steve Jobs control when he was the CEO?
This is just a ridiculous argument that companies can only succeed if the Founders/CEOs have absolute voting control. There are many examples of shareholders being more than happy to put their votes behind whatever the CEO wants as long as they believe in the CEO.
It's not a binary situation where you either own 51% or not. The larger the share of the company you own, the fewer stakeholders you need to convince to vote in your favor.
e.g. having 49% equity only requires ~2% of remaining shareholders to agree with any of your decisions.
If you're making remotely justifiable decisions, you're likely to get a decent chunk of shareholders supporting pretty much any position.
Also it's common to stack the board with allies who you can trust to vote in your favor/support your decisions.
So doesn't require much equity to have de facto control. But there will likely be a big difference in influence between, say, 10% and 20%
e.g. having 49% equity only requires ~2% of remaining shareholders to agree with any of your decisions.
If you're making remotely justifiable decisions, you're likely to get a decent chunk of shareholders supporting pretty much any position.
Also it's common to stack the board with allies who you can trust to vote in your favor/support your decisions.
So doesn't require much equity to have de facto control. But there will likely be a big difference in influence between, say, 10% and 20%
I'm in sympathy with that argument, but I don't think that singularly driven people are motivated by profit alone, and that they'll stop if there's some change is the underlying property ownership calculus.
Also, it's worth considering that not everything great is good, so perhaps a braking or governance system (in the sense of an engine) is worth requiring on any enterprise sufficiently large to become a juggernaut.
Also, it's worth considering that not everything great is good, so perhaps a braking or governance system (in the sense of an engine) is worth requiring on any enterprise sufficiently large to become a juggernaut.
If a committee can reject their initiatives, how are they going to implement them?
> it's worth considering that not everything great is good, so perhaps a braking or governance system (in the sense of an engine) is worth requiring on any enterprise sufficiently large to become a juggernaut.
Yeah, let's just throw SpaceX in the trash heap. Nevermind that NASA, the organization run by committee, has failed to make space accessible and routine.
The "braking system" is already in place. It's the free market. Once the "juggernaut" fails to please the customers, it goes down the tubes.
> it's worth considering that not everything great is good, so perhaps a braking or governance system (in the sense of an engine) is worth requiring on any enterprise sufficiently large to become a juggernaut.
Yeah, let's just throw SpaceX in the trash heap. Nevermind that NASA, the organization run by committee, has failed to make space accessible and routine.
The "braking system" is already in place. It's the free market. Once the "juggernaut" fails to please the customers, it goes down the tubes.
SpaceX is already run by committee. The president of SpaceX is Gwynne Shotwell and she is widely believed to regularly reign in Elon Musk. For example Elon wanted to cancel the Falcon Heavy project when NASA said they would never man-rate it, but Shotwell over-ruled him until he changed his mind.
Musk controls enough shares that he could get rid of Shotwell at any time, or reduce her power, but he chooses not to.
Musk controls enough shares that he could get rid of Shotwell at any time, or reduce her power, but he chooses not to.
Smart leaders have a nay-sayer to whisper in their ears when they're making a mistake. That doesn't mean they aren't in command, though.
The fact that Musk can get rid of her at any time speaks for itself. It doesn't mean she's a committee, either.
I've long suspected that the reason McCartney and Lennon wrote great songs for the Beatles, and not-so-great ones afterwards, is because each was willing to tell the other when their work was crap. Afterwards, they just had sycophants who'd tell them every note they wrote was fantastic.
The fact that Musk can get rid of her at any time speaks for itself. It doesn't mean she's a committee, either.
I've long suspected that the reason McCartney and Lennon wrote great songs for the Beatles, and not-so-great ones afterwards, is because each was willing to tell the other when their work was crap. Afterwards, they just had sycophants who'd tell them every note they wrote was fantastic.
> If he's great at his job I presume shareholders would want to keep him on as CEO and would compensate him handsomely in cash money.
This really isn't how the real world works. It's easy to design rules that would work acceptably if no humans were involved, but in reality this would ensure there are no sole owners of companies with control. Sooner or later, every CEO does something that "conventional wisdom" doesn't agree with, and if he doesn't have corporate control, he's out.
Yes, this would "hurt" gaming and the economy, because it would change the ownership of companies for the worse. If every game company was Bethesda, mediocrity and micropayments would rule the gaming world, because every company would pursue whatever strategy is perceived to be "obvious" to make shareholders' money increase.
If this tax had existed when Doom came out, Id software and the effects it had on gaming as we know it would never have existed.
On a side note, the people here commenting that companies could just pay a salary to their CEOs large enough to cover the wealth tax apparently have never owned or run a company. Any company being forced to pay out liquid cash equal to 20% of its stock valuation would go under. The usual killer of small to medium companies is cash flow.. having enough money to buy what you need to keep producing and paying bills until your customers pay their bills.
Also, if they're trying to tax theoretical gains, are they also going to pay out when companies' valuation decreases?
In corporate performance, you get what you measure. If the tax is charged based on companies gaining value, companies won't gain value.
That plus the fact that certain corporations are exempted from it (hedge funds) makes it a non starter.
This really isn't how the real world works. It's easy to design rules that would work acceptably if no humans were involved, but in reality this would ensure there are no sole owners of companies with control. Sooner or later, every CEO does something that "conventional wisdom" doesn't agree with, and if he doesn't have corporate control, he's out.
Yes, this would "hurt" gaming and the economy, because it would change the ownership of companies for the worse. If every game company was Bethesda, mediocrity and micropayments would rule the gaming world, because every company would pursue whatever strategy is perceived to be "obvious" to make shareholders' money increase.
If this tax had existed when Doom came out, Id software and the effects it had on gaming as we know it would never have existed.
On a side note, the people here commenting that companies could just pay a salary to their CEOs large enough to cover the wealth tax apparently have never owned or run a company. Any company being forced to pay out liquid cash equal to 20% of its stock valuation would go under. The usual killer of small to medium companies is cash flow.. having enough money to buy what you need to keep producing and paying bills until your customers pay their bills.
Also, if they're trying to tax theoretical gains, are they also going to pay out when companies' valuation decreases?
In corporate performance, you get what you measure. If the tax is charged based on companies gaining value, companies won't gain value.
That plus the fact that certain corporations are exempted from it (hedge funds) makes it a non starter.
Actually, why wouldn't the Epic's of the world just issue themselves shares with super voting power, like what Facebook and Google did. That would address the concern in his tweet.
You only get to do that if you're printing money at such an astounding rate that investors will do anything to get you to let them invest in you. FB and Google, yes, most other companies, not so much.
Lots of companies do it, most of which are not as dominant as FB and Google https://www.cii.org/files/3_17_17_List_of_DC_for_Website(1)....
It only really requires that shareholders trust the owners of the special class shares.
It only really requires that shareholders trust the owners of the special class shares.
A twitter reply says this:
>I think everyone needs to read the bill and calm down. "Gains on private assets -- including harder-to-value assets like real estate, art and private companies -- would escape the annual levy, and only be taxable when sold. "
>I think everyone needs to read the bill and calm down. "Gains on private assets -- including harder-to-value assets like real estate, art and private companies -- would escape the annual levy, and only be taxable when sold. "
Does that means founders would lose control when they IPO?
what does the government need all that money for anyways?
Same could be asked of any billionaire.
Think about it. 1 Billion. A person who lived 100 years would have $27,397 a day to spend. Including as a newborn infant.
At Bezos levels? roughly $5.3 million a day.
What could you do with 5 million a day? Well for the first 3 months of your life as a newborn, not much probably.
But as an adult certainly, you could find ways to spend it right? Great. Society would love to see some cash splashed around. The economics people always love to see money sloshing around society.
So why can't these people simply stop accumulating and start letting it flow? They'd get to enjoy it. Their society would benefit from it. It'd be good for everyone.
The more these people are forced to spend down their wealth - however they want to! - the better.
Think about it. 1 Billion. A person who lived 100 years would have $27,397 a day to spend. Including as a newborn infant.
At Bezos levels? roughly $5.3 million a day.
What could you do with 5 million a day? Well for the first 3 months of your life as a newborn, not much probably.
But as an adult certainly, you could find ways to spend it right? Great. Society would love to see some cash splashed around. The economics people always love to see money sloshing around society.
So why can't these people simply stop accumulating and start letting it flow? They'd get to enjoy it. Their society would benefit from it. It'd be good for everyone.
The more these people are forced to spend down their wealth - however they want to! - the better.
with that logic, what's the threshold for forcing them to spend down their wealth? 1 billion, half a billion, 1 million, 1 hundred thousand?
If the government takes it, what are they going to spend it on? Foreign wars, jails, lavish mansions for leaders?
But quite honestly, if somebody makes a successful business, wise investments, or works their ass off building an empire, who's to say they can't enjoy all the wealth they've brought in?
Bezos may be filthy rich, but because of the countless hours of work he put in (don't tell me he didn't work nights and weekends while his employees worked 9-5) so you can enjoy groceries on demand, 2 day delivery on almost anything you want, and great video streaming. Stop using the services he created if you want his wealth to go down.
If the government takes it, what are they going to spend it on? Foreign wars, jails, lavish mansions for leaders?
But quite honestly, if somebody makes a successful business, wise investments, or works their ass off building an empire, who's to say they can't enjoy all the wealth they've brought in?
Bezos may be filthy rich, but because of the countless hours of work he put in (don't tell me he didn't work nights and weekends while his employees worked 9-5) so you can enjoy groceries on demand, 2 day delivery on almost anything you want, and great video streaming. Stop using the services he created if you want his wealth to go down.
Threshold? Say a billion. To be revised as inflation does it's thing.
I never mentioned the government taking it.
I want them to enjoy the wealth they have! Not as a big number, but as use of that number to buy/experience/do things. Bezos can buy 5 Ferraris a day for the rest of his life if he wants to for all I care. Just use the stuff.
Bezos is indeed rich, and no doubt worked long hours. But it wasn't the hours he did.
#1 Median wealth american = $121,760 Bezos wealth = 196.1 billion
If it was just the hours then (median wealth american work hours) x 1.6million = bezos work hours.
If the median american worked a mere 1 hour a week, then Bezos is working 1.6 million hours a week. Seems kinda tough to fit into the schedule...
No, he has leverage. And in this thread I am not even questioning whether he should have that leverage. Just saying, he's got money, he should spend it.
And I do try to avoid Amazon as best I can. But it is embedded in computing/supply chains and there's only so much anyone can do.
#1 https://www.forbes.com/advisor/investing/average-net-worth/
I never mentioned the government taking it.
I want them to enjoy the wealth they have! Not as a big number, but as use of that number to buy/experience/do things. Bezos can buy 5 Ferraris a day for the rest of his life if he wants to for all I care. Just use the stuff.
Bezos is indeed rich, and no doubt worked long hours. But it wasn't the hours he did.
#1 Median wealth american = $121,760 Bezos wealth = 196.1 billion
If it was just the hours then (median wealth american work hours) x 1.6million = bezos work hours.
If the median american worked a mere 1 hour a week, then Bezos is working 1.6 million hours a week. Seems kinda tough to fit into the schedule...
No, he has leverage. And in this thread I am not even questioning whether he should have that leverage. Just saying, he's got money, he should spend it.
And I do try to avoid Amazon as best I can. But it is embedded in computing/supply chains and there's only so much anyone can do.
#1 https://www.forbes.com/advisor/investing/average-net-worth/
Ah, so in effect, this bill is just a massive IPO disincentivizer.
Isn’t Sweeney talking about publicly traded companies here though?
One of his tweets in the chain:
>Every time a company’s value doubles, the government would force founders like me to sell 25% of our stake to pay the government. Epic’s value has doubled 8 times in the past 5 years. If this tax scheme had been place, I’d have been forced to liquidate nearly my entire ownership.
Epic Games has always been a private company.
>Every time a company’s value doubles, the government would force founders like me to sell 25% of our stake to pay the government. Epic’s value has doubled 8 times in the past 5 years. If this tax scheme had been place, I’d have been forced to liquidate nearly my entire ownership.
Epic Games has always been a private company.
> Well, one workaround would be to treat securitization of shares (eg for a loan) as a taxable event. This is a common (and currently legal) tax avoidance strategy.
I suspect it would be harder to stop this strategy than it might seem, because someone could happen to make me a large personal loan at a low interest rate when I happened to have a large portfolio with them. If the numbers are big enough, it makes sense to do.
If you treated all loans as income, but got a deduction for making payments... Maybe you could make it work. Although, that's kind of rough for mortgage and auto loans.
I suspect it would be harder to stop this strategy than it might seem, because someone could happen to make me a large personal loan at a low interest rate when I happened to have a large portfolio with them. If the numbers are big enough, it makes sense to do.
If you treated all loans as income, but got a deduction for making payments... Maybe you could make it work. Although, that's kind of rough for mortgage and auto loans.
Mortgage and auto loans are usually cash secured, so there are no gains to realize. This tax treatment could (I would say should) only apply to e.g. shares on the difference between the cost basis and amount used to collateralize the loan.
One quirk of that is that regular Joe could then get a loan against their cost basis in their portfolio and still have no taxes. E.g. they bought 10shares of $X at $100 and now it’s $200. A loan secured against those shares would not be taxable up to $1000 and the portion between $1000 and $2000 would be taxable. This still stops mega billionaires from never paying taxes because the cost bases on their shares are usually very low.
One quirk of that is that regular Joe could then get a loan against their cost basis in their portfolio and still have no taxes. E.g. they bought 10shares of $X at $100 and now it’s $200. A loan secured against those shares would not be taxable up to $1000 and the portion between $1000 and $2000 would be taxable. This still stops mega billionaires from never paying taxes because the cost bases on their shares are usually very low.
[deleted]
>No matter how destructive of shareholder value or public goods his executive decisions, it's virtually impossible for anyone else to overturn them barring some novel legal line of attack...
IMHO, if the CEO's decisions are destructive of public goods, shareholders aren't the ones we should go to. We should be able to stop the CEO via government powers.
>but would the economy or the gaming world be worse off if he no longer had founder control?
Shareholder activism has a very double edged record. Their interests aren't necessarily the public's interest or the company's. Maybe they like dividends now rather than investment - their incentives definitely point that way. Giving them more power is unlikely to end well.
IMHO, if the CEO's decisions are destructive of public goods, shareholders aren't the ones we should go to. We should be able to stop the CEO via government powers.
>but would the economy or the gaming world be worse off if he no longer had founder control?
Shareholder activism has a very double edged record. Their interests aren't necessarily the public's interest or the company's. Maybe they like dividends now rather than investment - their incentives definitely point that way. Giving them more power is unlikely to end well.
Some observations:
1. Whatever happened to increasing tax rates, like pretty much every other country? Why these weird gimmicks?
2. A much greater cause of elite wealth accumulation is running deficits. Deficits are when you want to spend on social welfare but don't have the courage to pay for it with taxes. So you make both sides happy and increase spending while running up deficits. The reason we've seen this astronomical increase in top incomes is because of massive deficit spending.
3. Any tax bill targeting billionaires is going to fail since they can give up US citizenship and offshore whatever they want. If you are serious about soaking the rich, you need controls on capital flight. But that goes against the neoliberal project of globalization. Commitment to that project is going to make any soak-the-rich effort not work. It will end up hitting the upper middle class that can't offshore -- they are the real targets.
4. Envy-based politics don't work. There is a dangerous game being played here. You want to inculcate solidarity and national purpose, but again that goes against the liberal project that only tells us who we are supposed to hate based on their race and/or class.
5. If you have a low interest rate policy, then you are going to make a lot of billionaires much richer via capital appreciation. That's not the fault of the billionaires. If you want to reduce that, then raise interest rates. All these billionaires will become much poorer. Because this is all just paper wealth.
6. The Original Sin of the left is trying to mess with prices instead of incomes. Tax incomes, not repricing of wealth.
1. Whatever happened to increasing tax rates, like pretty much every other country? Why these weird gimmicks?
2. A much greater cause of elite wealth accumulation is running deficits. Deficits are when you want to spend on social welfare but don't have the courage to pay for it with taxes. So you make both sides happy and increase spending while running up deficits. The reason we've seen this astronomical increase in top incomes is because of massive deficit spending.
3. Any tax bill targeting billionaires is going to fail since they can give up US citizenship and offshore whatever they want. If you are serious about soaking the rich, you need controls on capital flight. But that goes against the neoliberal project of globalization. Commitment to that project is going to make any soak-the-rich effort not work. It will end up hitting the upper middle class that can't offshore -- they are the real targets.
4. Envy-based politics don't work. There is a dangerous game being played here. You want to inculcate solidarity and national purpose, but again that goes against the liberal project that only tells us who we are supposed to hate based on their race and/or class.
5. If you have a low interest rate policy, then you are going to make a lot of billionaires much richer via capital appreciation. That's not the fault of the billionaires. If you want to reduce that, then raise interest rates. All these billionaires will become much poorer. Because this is all just paper wealth.
6. The Original Sin of the left is trying to mess with prices instead of incomes. Tax incomes, not repricing of wealth.
> 1. Whatever happened to increasing tax rates, like pretty much every other country? Why these weird gimmicks?
I live in one of those countries,... I used to live in another country, that had a red star in the flag, I haven't moved, but I now live in another country... which again has new parties with red star flags.
Every time I hear "tax the rich", the same thing happens... the poor already pay almost zero tax, so nothing happens to them. The rich open a company two countries away in one direction, and register their car two countries away in a different direction, and in the end, pay very little tax. And me? Earning an above-national-average engineering pay, but way below "rich" enough to make such manipulations worth it? I get fucked with new taxes.
In an ideal world, both people like me and people like bezos would pay a same amount (percentage) of tax for every dollar/euro going from our workplace to the crap we both buy, but somehow i get taxed as fuck, and Bezos doesnt ( https://www.businessinsider.com/jeff-bezos-did-not-pay-incom... ).
So how about we first tax Amazon and Bezos at the same rate we tax the local mom and pop bookstore, and their owners paychecks, and then continue from there.
I live in one of those countries,... I used to live in another country, that had a red star in the flag, I haven't moved, but I now live in another country... which again has new parties with red star flags.
Every time I hear "tax the rich", the same thing happens... the poor already pay almost zero tax, so nothing happens to them. The rich open a company two countries away in one direction, and register their car two countries away in a different direction, and in the end, pay very little tax. And me? Earning an above-national-average engineering pay, but way below "rich" enough to make such manipulations worth it? I get fucked with new taxes.
In an ideal world, both people like me and people like bezos would pay a same amount (percentage) of tax for every dollar/euro going from our workplace to the crap we both buy, but somehow i get taxed as fuck, and Bezos doesnt ( https://www.businessinsider.com/jeff-bezos-did-not-pay-incom... ).
So how about we first tax Amazon and Bezos at the same rate we tax the local mom and pop bookstore, and their owners paychecks, and then continue from there.
Why would a billionaire leave the US? There they are like gods with services to cater to their every whim. Nowhere else in the world will roll out the carpet for big money like the US does (excluding maybe Monaco and other small states). I just see 3 as a false assumption, as any country they 'flee' to will have higher taxes anyway.
I live in New Zealand and a billionaire here can have a lot of land but otherwise we just don't have the infrastructure to support that ultra high end lifestyle. They would basically be average people with nice toys and a big house here.
I live in New Zealand and a billionaire here can have a lot of land but otherwise we just don't have the infrastructure to support that ultra high end lifestyle. They would basically be average people with nice toys and a big house here.
Warren Buffet lives in a 6000 sq ft (~600 sqm) house, drives a 2014 Cadillac, and has McDonald's for breakfast. Despite owning one of the most valuable companies in the world at most one could say he lives like a single-digit millionaire. If your characterization of the "average people" of New Zealand is true, then it seems like he would have no problem fitting right in.
Warren Buffet would be welcome but he'd have a hard time meeting new founders and companies to invest in. Gabe Newell has been hanging out here for a while too and he's fairly down to earth.
I guess my point is that you lose a lot of the perks of being rich by leaving the USA. If you are happy without them then maybe the wealth tax doesn't impact you anyway and you stay where you are
I guess my point is that you lose a lot of the perks of being rich by leaving the USA. If you are happy without them then maybe the wealth tax doesn't impact you anyway and you stay where you are
So why would he uproot his entire life that he's happy with to move somewhere with a slightly lower tax rate when he can still support his relatively modest lifestyle a thousand times over?
If the United States accepts a federal wealth tax, moving to a low tax state like South Dakota or Alaska won't help. And despite what you imply in your last statement, owning a successful business isn't just limited to how much money it makes. Few people just give up the sum of their life's work or accept others' taking away from it. Just because others believe that the Warren Buffets of the world have achieved "enough" does not make it so.
Buffet has aggressively written about and commented on the need for higher taxes on people like himself.
Do all billionaires want the big carpet? What about those that want a lot of land and houses, complete financial irrelevance for their family's lifestyles, and perhaps meaningful work by directing a large company or endowment.
1) They're trying to create a billionaire tax that will somehow pass the corrupt mess in the US Federal government and also not permit loopholes for tax evasion. I think it might be just a dog and pony show since there's little chance of anything passing the Senate at the moment and because it's a non starter for Republicans.
2) I don't agree with your reasoning here.
3) The US is pushing extraterritoriality pretty well, and the nations of the world have agreed to try to eliminate tax havens. Pretty soon there won't be an "overseas" to go to.
4) I don't accept the terms "liberal" or "conservative" to mean what most of the people who use them mean. As labels, they promote sloppy thinking. I consider the authors of this tax to be the Democratic party, who have already proven they are far too establishment to be allowed to continue to exist.
5) Not really possible, because raising those interest rates has other effects. Rather than taxing theoretical company values, tax purchases, VAT- style.
6) You're treating "the left" here as if it's a hard and fast definition of a group of people. Politics in the US is far more complicated than that. There may be some truth to what you say here if you are talking about specific groups of people, but just equating Democrats/the authors of this bill to "the left" isn't accurate, and that sort of inaccuracy perpetuates political partisanship and extremist thinking.
2) I don't agree with your reasoning here.
3) The US is pushing extraterritoriality pretty well, and the nations of the world have agreed to try to eliminate tax havens. Pretty soon there won't be an "overseas" to go to.
4) I don't accept the terms "liberal" or "conservative" to mean what most of the people who use them mean. As labels, they promote sloppy thinking. I consider the authors of this tax to be the Democratic party, who have already proven they are far too establishment to be allowed to continue to exist.
5) Not really possible, because raising those interest rates has other effects. Rather than taxing theoretical company values, tax purchases, VAT- style.
6) You're treating "the left" here as if it's a hard and fast definition of a group of people. Politics in the US is far more complicated than that. There may be some truth to what you say here if you are talking about specific groups of people, but just equating Democrats/the authors of this bill to "the left" isn't accurate, and that sort of inaccuracy perpetuates political partisanship and extremist thinking.
> 1. Whatever happened to increasing tax rates, like pretty much every other country? Why these weird gimmicks?
I got tired of reading the daily play-by-plays, but something to do with appeasing Kirsten Sinema's objection to a more straightforward tax hike.
Very few people are going to give up US citizenship. A lot of these guys can't even stand living in Florida; they're not going to hang out in the Caribbean for the rest of their lives.
I got tired of reading the daily play-by-plays, but something to do with appeasing Kirsten Sinema's objection to a more straightforward tax hike.
Very few people are going to give up US citizenship. A lot of these guys can't even stand living in Florida; they're not going to hang out in the Caribbean for the rest of their lives.
I agree with a lot of that but regarding (3), there's already an exit tax, which is the same as the capital gains tax if you sold everything.
This is less of an issue for those who inherited wealth, since a lot of it might already be in offshore trusts. Company founders don't have an easy out.
This is less of an issue for those who inherited wealth, since a lot of it might already be in offshore trusts. Company founders don't have an easy out.
That's a valid point. Short term, you'll soak some founders, but future founders can set up the offshore trust, or just start their business elsewhere.
That's no true with deficits. The way we have historically choosen to do monetary policy has some bad distributional effects, but regular fiscal policy or a UBI does not.
This is, frankly, an extremely dangerous misunderstanding because it's austerity and slack labor markets markets that have immiserated the non-rich. Deficits themselves are never the problem.
Look mo further than the pandemic checks causing us to live in a time of renewed labor unrest rather than a second great depression.
Also debt financing is a charade. Read https://www.jstor.org/stable/40981939 which spells it out clearly.
This is, frankly, an extremely dangerous misunderstanding because it's austerity and slack labor markets markets that have immiserated the non-rich. Deficits themselves are never the problem.
Look mo further than the pandemic checks causing us to live in a time of renewed labor unrest rather than a second great depression.
Also debt financing is a charade. Read https://www.jstor.org/stable/40981939 which spells it out clearly.
> That's no true with deficits.
Honestly, that's not much of a rebuttal.
If you believe in Ricardian Equivalence, then sure, the future deficits are matched by private savings to offset future tax liabilities. Well, what do you think an increase in networth is other than an increase in private savings?
But if you do not believe in Ricardian Equivalence, then the deficit spending is an increase in net-wealth, which again shows up disproportionately on the balance sheets of the wealthy.
So there is really no way around it. Merely calling this "wrong" and "dangerous" is not an argument -- when a government wants to pay benefits but refuses to fund them with taxes, then given that taxes are disproportionately paid for by the wealthy, you are going to have distributional effects.
This is just the flip-side of the old Keynesian saw about balanced budget multipliers.
I really don't see how this is controversial except for the crowd that wants more spending but knows there is not the political will to fund it with taxes. Then this is an unpleasant side effect that they don't want to think about, but that doesn't make it "not true".
Honestly, that's not much of a rebuttal.
If you believe in Ricardian Equivalence, then sure, the future deficits are matched by private savings to offset future tax liabilities. Well, what do you think an increase in networth is other than an increase in private savings?
But if you do not believe in Ricardian Equivalence, then the deficit spending is an increase in net-wealth, which again shows up disproportionately on the balance sheets of the wealthy.
So there is really no way around it. Merely calling this "wrong" and "dangerous" is not an argument -- when a government wants to pay benefits but refuses to fund them with taxes, then given that taxes are disproportionately paid for by the wealthy, you are going to have distributional effects.
This is just the flip-side of the old Keynesian saw about balanced budget multipliers.
I really don't see how this is controversial except for the crowd that wants more spending but knows there is not the political will to fund it with taxes. Then this is an unpleasant side effect that they don't want to think about, but that doesn't make it "not true".
Well I certainly do not agree with Ricardian equivalence. For it to hold, one must assume lump sun taxes which one cannot avoid by being poor. That's a ridiculous assumption.
> But if you do not believe in Ricardian Equivalence, then the deficit spending is an increase in net-wealth, which again shows up disproportionately on the balance sheets of the wealthy.
My whole point was that this is not necessarily true, and depends on the form the spending takes place. Did you miss that?
Even if a UBI eventually trickles up, we must not conflate solvency and liquidity. The boss has power because the worker's consumption is more time sensative than the production. A good UBI takes away that coercive power not (just) by increasing worker savings, but by making an income floor. (Stock vs flow).
That's like giving people the ability to go longer without food and water so long as their nutritional needs are still met on a (longer term) average.
> But if you do not believe in Ricardian Equivalence, then the deficit spending is an increase in net-wealth, which again shows up disproportionately on the balance sheets of the wealthy.
My whole point was that this is not necessarily true, and depends on the form the spending takes place. Did you miss that?
Even if a UBI eventually trickles up, we must not conflate solvency and liquidity. The boss has power because the worker's consumption is more time sensative than the production. A good UBI takes away that coercive power not (just) by increasing worker savings, but by making an income floor. (Stock vs flow).
That's like giving people the ability to go longer without food and water so long as their nutritional needs are still met on a (longer term) average.
> My whole point was that this is not necessarily true, and depends on the form the spending takes place. Did you miss that?
Nope, I didn't miss it, because it's not relevant. Giving money to poor tenants ends up in the pocket of landlords. Letting poorer people buy iPhones ends up in the money of shareholders and is realized as an increase in Apple stock price, etc.
When you have a small group of the people disproportionately own the capital stock, then giving people more spending money absolutely ends up benefiting those people disproportionately.
> Even if a UBI eventually trickles up, we must not conflate solvency and liquidity.
Neither is being discussed here. I am saying that if you have an economy in which people earn unequal incomes which, you know, must happen given that people make unequal contributions to society, then things like supports for the poor have to be funded with taxes, otherwise this will drive more inequality.
And given that the wealthy pay by far the most taxes, then deficit spending disproportionately benefits the wealthy.
Nope, I didn't miss it, because it's not relevant. Giving money to poor tenants ends up in the pocket of landlords. Letting poorer people buy iPhones ends up in the money of shareholders and is realized as an increase in Apple stock price, etc.
When you have a small group of the people disproportionately own the capital stock, then giving people more spending money absolutely ends up benefiting those people disproportionately.
> Even if a UBI eventually trickles up, we must not conflate solvency and liquidity.
Neither is being discussed here. I am saying that if you have an economy in which people earn unequal incomes which, you know, must happen given that people make unequal contributions to society, then things like supports for the poor have to be funded with taxes, otherwise this will drive more inequality.
And given that the wealthy pay by far the most taxes, then deficit spending disproportionately benefits the wealthy.
>Nope, I didn't miss it, because it's not relevant. Giving money to poor tenants ends up in the pocket of landlords. Letting poorer people buy iPhones ends up in the money of shareholders and is realized as an increase in Apple stock price, etc.
That's a little extreme. It's fair to argue that giving money or benefits to poor people may not directly reduce inequality. More importantly, since progressive taxes do reduce inequality, it follows that the same level of spending with lower tax rates results in higher inequality than the spending with a balanced budget up to inflation.
But it also has positive externalities, such as improved public health. By contrast quantitative easing, almost by definition, has minimal externalities, although I'm partial to the argument that subsidizing real estate prices tends to increase inequality. These externalities disproportionately accrue to the poor because rich people tend to manage their personal environments in a way that insulates them from the winds of the societal landscape. Sometimes these are not easy to account for financially but that does not impugn their value.
So deficit spending on the war in Afghanistan, for example, is probably worse for inequality than deficit spending on education.
That's a little extreme. It's fair to argue that giving money or benefits to poor people may not directly reduce inequality. More importantly, since progressive taxes do reduce inequality, it follows that the same level of spending with lower tax rates results in higher inequality than the spending with a balanced budget up to inflation.
But it also has positive externalities, such as improved public health. By contrast quantitative easing, almost by definition, has minimal externalities, although I'm partial to the argument that subsidizing real estate prices tends to increase inequality. These externalities disproportionately accrue to the poor because rich people tend to manage their personal environments in a way that insulates them from the winds of the societal landscape. Sometimes these are not easy to account for financially but that does not impugn their value.
So deficit spending on the war in Afghanistan, for example, is probably worse for inequality than deficit spending on education.
Yeah really simply, if absent enough taxes, money "pools" to the rich and doesn't keep on circulating, that also means the rich aren't spending it. By definition.
If so....then what's the problem?
One possible answer is "well, the Rich have more risk tolerance, so they can just summon a catastrophe to improve their relative standing in a negative-sum situation with little pain" I think that's a fair argument. Do MMT, and the rich try to sabotage undoing global warming so they can rule the roost in some max max situation sure. But such analysis means we have to broach Solvency vs Liquidity as PP didn't want to. A UBI-empowered workforce can also more and safely easily go after the rich with pitchforks and shear numbers, strike at the plants that arm their body guards, not treat them when they are sick in the hospital.
Keynes and Marx disagreed on many things, but did agree on C-M-C vs M-C-M. In regular-enough times, firms are slaves to nominal values: boost aggregate demand and they will not be able to able to boycott and resist. But also, workers are not slaves to rich people's unspent inert savings if empowered by means external to private emplyment. "Nominal dollar power" works better on the former than the latter.
If so....then what's the problem?
One possible answer is "well, the Rich have more risk tolerance, so they can just summon a catastrophe to improve their relative standing in a negative-sum situation with little pain" I think that's a fair argument. Do MMT, and the rich try to sabotage undoing global warming so they can rule the roost in some max max situation sure. But such analysis means we have to broach Solvency vs Liquidity as PP didn't want to. A UBI-empowered workforce can also more and safely easily go after the rich with pitchforks and shear numbers, strike at the plants that arm their body guards, not treat them when they are sick in the hospital.
Keynes and Marx disagreed on many things, but did agree on C-M-C vs M-C-M. In regular-enough times, firms are slaves to nominal values: boost aggregate demand and they will not be able to able to boycott and resist. But also, workers are not slaves to rich people's unspent inert savings if empowered by means external to private emplyment. "Nominal dollar power" works better on the former than the latter.
I don't think we can have conversation. To me, the numbers are secondary to their effects, that is kind of the thesis of the function finance paper too.
Concretely stuff like UBI and a JG at least in the first order takes away a power of employers now amount of nominal inequality can give back. And if the limits to spending are real and not nominal, and rich people don't spend their wealth so much, taxing them hardly makes a difference w.r.t those constraints. Conversely, if they do spend it, easy to levy consumption taxes will be less recessive.
If you want to continue to the debate, I think need to you get more precise about what exactly is bad about the nominal inequality you speak of. I think that is the only way to reconcile our analytical frames.
Concretely stuff like UBI and a JG at least in the first order takes away a power of employers now amount of nominal inequality can give back. And if the limits to spending are real and not nominal, and rich people don't spend their wealth so much, taxing them hardly makes a difference w.r.t those constraints. Conversely, if they do spend it, easy to levy consumption taxes will be less recessive.
If you want to continue to the debate, I think need to you get more precise about what exactly is bad about the nominal inequality you speak of. I think that is the only way to reconcile our analytical frames.
So, consider for a moment that I've understood MMT for almost two decades now.
Also consider that there is a lot that MMT does not address, in its maniacal focus on whether it's possible to fund government programs without paying for them with taxes. There are other problems, like assuming savings demands are inelastic, but let's just focus on the distributional aspects.
One of the main drawbacks is that ZIRP or massive deficit spending is always and everywhere correlated to increasing wealth inequality vis-a-vis nations that have more balanced budgets.
Then consider that none of the social democracies that have large safety nets use MMT principles and all of them run fairly balanced budgets for a reason, and that reason is not lack of knowledge about fiat currencies. Really there is a lot less here than meets the eye, and you pay a big price for adopting these kinds of policies.
ZIRP is also a great way to privilege land over productive investment, because when you increase the duration of assets, then you want more stable assets whose value is guaranteed at the expense of more risky (productive) assets.
And it's a great way to drive down the marginal product of capital -- a good example of all these effects playing out would be Japan. Rapidly increasing inequality, small businesses are starved for loans, but tons of free money for incumbent bureaucracies and housing, and hugely inefficient large corporate bureaucracies.
By the way, it's no accident that Warren Mosler is a wealthy former hedge fund guy. It is literally the utopian economic policy of Finance, because MMT is clear that it does not want banks subject to discipline on the liability side of the balance sheet (Mosler owns his own bank and would like lower funding costs), and folks like Mosler even advocate eliminating income taxes entirely and funding the government -- oops, I forgot to say "anchoring the currency" -- based solely on a property tax. So this is a mix of forced savings, inefficient business, rising inequality, and credit allocated towards non-productive industries at the expense of productive industries.
Anyways, if you want to create a feudal society, then this is a good way to do it. But don't worry, there will be a job guarantee in there for you.
Also consider that there is a lot that MMT does not address, in its maniacal focus on whether it's possible to fund government programs without paying for them with taxes. There are other problems, like assuming savings demands are inelastic, but let's just focus on the distributional aspects.
One of the main drawbacks is that ZIRP or massive deficit spending is always and everywhere correlated to increasing wealth inequality vis-a-vis nations that have more balanced budgets.
Then consider that none of the social democracies that have large safety nets use MMT principles and all of them run fairly balanced budgets for a reason, and that reason is not lack of knowledge about fiat currencies. Really there is a lot less here than meets the eye, and you pay a big price for adopting these kinds of policies.
ZIRP is also a great way to privilege land over productive investment, because when you increase the duration of assets, then you want more stable assets whose value is guaranteed at the expense of more risky (productive) assets.
And it's a great way to drive down the marginal product of capital -- a good example of all these effects playing out would be Japan. Rapidly increasing inequality, small businesses are starved for loans, but tons of free money for incumbent bureaucracies and housing, and hugely inefficient large corporate bureaucracies.
By the way, it's no accident that Warren Mosler is a wealthy former hedge fund guy. It is literally the utopian economic policy of Finance, because MMT is clear that it does not want banks subject to discipline on the liability side of the balance sheet (Mosler owns his own bank and would like lower funding costs), and folks like Mosler even advocate eliminating income taxes entirely and funding the government -- oops, I forgot to say "anchoring the currency" -- based solely on a property tax. So this is a mix of forced savings, inefficient business, rising inequality, and credit allocated towards non-productive industries at the expense of productive industries.
Anyways, if you want to create a feudal society, then this is a good way to do it. But don't worry, there will be a job guarantee in there for you.
So, you might be making good points, but honestly you come off sounding just cynical, vindictive and shitty.
It's great you are familiar with the stuff, but you against skirted the question I asked. I'll repeate what is so bad about inequality? To be clear I don't think it's good either, and I would not be opposed to all manner of wealth taxes. But just saying "It's bad, duh", "MMT is a con for Mosler" doesn't give me anything concrete to respond to.
I mean really, would would you want me to say in response? Mosler would need a time machine to con Abba Lerner or Kalecki.
> Then consider that none of the social democracies that have large safety nets use MMT principles and all of them run fairly balanced budgets for a reason. That reason is not lack of knowledge about fiat currencies.
A good reason? The Euro is constitutionally ordoliberal and fucking over Greece in a way that makes the even Krugmans cringe doesn't look like deep wisdom to me. German nuclear policy is also insane, fwiw. I don't see the EU as being especially enlightened at all, I just saw a better and stronger legacy of the postwar era than over here, and better voting systems on the national level.
I can well believe they don't get it same as over here by and large, and the left fringe is only "wiser" in the anglosphere as a consequence of being radicalized harder by pan-Anglo austerity. That's certainly not an accelerationism worth being proud of.
> ZIRP is also a great way to privilege land over productive investment, because when you increase the duration of assets, then you want more stable assets whose value is guaranteed at the expense of more risky (productive) assets.
So do the hardcore form LVT where we essentially, and instant-auction keeps self-assessments honest.
> Anyways, if you want to create a feudal society, then this is a good way to do it. But don't worry, there will be a job guarantee in there for you.
FWIW I am clearly not a 100% MMT orthodox person because I kept on bringing up UBI in a positive light. I do want to reduce working hours and the cultural valorization of work too and so I find pure JG kind of aethetically abhorent, even if it could put preasure on the workweek.
-------
To sum up, I fully grant that unchecked unequality could allow a new powerful elite to suddenly end the JG or UBI. But a world in which either of those are possible in the first place is a) quite different b) should allow for the type of politics that also go after wealth / massage private property / undemocratic workplaces / whatever your boogieman is.
But I believe that in great powers not savaged by war, there can't be good politics without tight labor markets, so to the extent there is a economic--political chicken and egg problem, Post-Keynesian ideas like this provide when of the few forseable bootstraps.
If we fail to do so, we will get to that neo-feudalism you fear by austerity anyways, as lax labor markets make capital investment including maintainence uneconomical, and we barrel towards a less productive more dysfunctional society.
I mean really, would would you want me to say in response? Mosler would need a time machine to con Abba Lerner or Kalecki.
> Then consider that none of the social democracies that have large safety nets use MMT principles and all of them run fairly balanced budgets for a reason. That reason is not lack of knowledge about fiat currencies.
A good reason? The Euro is constitutionally ordoliberal and fucking over Greece in a way that makes the even Krugmans cringe doesn't look like deep wisdom to me. German nuclear policy is also insane, fwiw. I don't see the EU as being especially enlightened at all, I just saw a better and stronger legacy of the postwar era than over here, and better voting systems on the national level.
I can well believe they don't get it same as over here by and large, and the left fringe is only "wiser" in the anglosphere as a consequence of being radicalized harder by pan-Anglo austerity. That's certainly not an accelerationism worth being proud of.
> ZIRP is also a great way to privilege land over productive investment, because when you increase the duration of assets, then you want more stable assets whose value is guaranteed at the expense of more risky (productive) assets.
So do the hardcore form LVT where we essentially, and instant-auction keeps self-assessments honest.
> Anyways, if you want to create a feudal society, then this is a good way to do it. But don't worry, there will be a job guarantee in there for you.
FWIW I am clearly not a 100% MMT orthodox person because I kept on bringing up UBI in a positive light. I do want to reduce working hours and the cultural valorization of work too and so I find pure JG kind of aethetically abhorent, even if it could put preasure on the workweek.
-------
To sum up, I fully grant that unchecked unequality could allow a new powerful elite to suddenly end the JG or UBI. But a world in which either of those are possible in the first place is a) quite different b) should allow for the type of politics that also go after wealth / massage private property / undemocratic workplaces / whatever your boogieman is.
But I believe that in great powers not savaged by war, there can't be good politics without tight labor markets, so to the extent there is a economic--political chicken and egg problem, Post-Keynesian ideas like this provide when of the few forseable bootstraps.
If we fail to do so, we will get to that neo-feudalism you fear by austerity anyways, as lax labor markets make capital investment including maintainence uneconomical, and we barrel towards a less productive more dysfunctional society.
>causing us to live in a time of renewed labor unrest rather than a second great depression.
So far, it's showing signs of being both.
UBI is a non starter for at least the next three or four decades except in limited cases. Education of all the rural ("red state") voters has to happen before anything like that would be possible to enact... right now their perception that other people are having an easier time in life because they're given things that the first group had to work for is reason enough for them to have put Trump in power.
So far, it's showing signs of being both.
UBI is a non starter for at least the next three or four decades except in limited cases. Education of all the rural ("red state") voters has to happen before anything like that would be possible to enact... right now their perception that other people are having an easier time in life because they're given things that the first group had to work for is reason enough for them to have put Trump in power.
> Any tax bill targeting billionaires is going to fail since they can give up US citizenship and offshore whatever they want.
But they'll also get taxed out the wazoo when they do so, so it won't really avoid the problem causing them to leave in the first place.
But they'll also get taxed out the wazoo when they do so, so it won't really avoid the problem causing them to leave in the first place.
Taxing incomes and not wealth is fundamentally unfair to people without wealth.
The thing is, it is really foolish to make economic policy based on what, as the economist Brad deLong likes to call our East African Plain Ape brain, thinks of as fair. That's just atavistic sentiment. If you run an economy based on these types of emotions, you will end up with a terrible economy in which people are worse off.
Instead, we want to make economic policy based on what will do the most good, not what we think of as being "fair" or "equitable".
The idea of "fairness" says you should shut down gifted programs because they don't support "equity" -- another name for fairness. The smart policy is to have gifted programs even if the result does not seem fair to you. Because that improves living standards for everyone. Having those people drive innovation in the economy is a good thing, even if they are not racially balanced according to whatever bucket system you are using. Constantly worrying that someone else might have more than you is a great way to create an impoverished society, even though that is what the Plains Ape brain worries about.
Now we already disproportionately tax people -- quite a bit. There is no need to disincentivize entrepreneurship in order to satisfy our base instincts for "fairness". If you want to raise marginal rates -- fine, do that. If you want to eliminate the preferential tax treatment for long term capital gains, fine, do that. I'm happy treating all income the same and taxing it according to a single progressive rate. But I would not support taxing paper wealth or unrealized gains merely as a result of repricing of assets. There are other tax reforms that are less harmful to capital formation.
Instead, we want to make economic policy based on what will do the most good, not what we think of as being "fair" or "equitable".
The idea of "fairness" says you should shut down gifted programs because they don't support "equity" -- another name for fairness. The smart policy is to have gifted programs even if the result does not seem fair to you. Because that improves living standards for everyone. Having those people drive innovation in the economy is a good thing, even if they are not racially balanced according to whatever bucket system you are using. Constantly worrying that someone else might have more than you is a great way to create an impoverished society, even though that is what the Plains Ape brain worries about.
Now we already disproportionately tax people -- quite a bit. There is no need to disincentivize entrepreneurship in order to satisfy our base instincts for "fairness". If you want to raise marginal rates -- fine, do that. If you want to eliminate the preferential tax treatment for long term capital gains, fine, do that. I'm happy treating all income the same and taxing it according to a single progressive rate. But I would not support taxing paper wealth or unrealized gains merely as a result of repricing of assets. There are other tax reforms that are less harmful to capital formation.
Modern societies are not capital constrained, so capital formation is superfluous. The world is awash in excess capital among the rich, so providing government subsidies to facilitate further capital formation among the rich will not improve living standards.
What you're describing is the failed mentality of the early 1980's : the idea that the wealthy are "better" at capital allocation than everyone else. What it leads to is not some utopia, but simply bigger yachts, and more expensive sports teams, and more expensive land, while the human capital of the poor goes neglected and untapped.
What does the most good for living standards is the government investing in humans and households without capital. More broadly distributed capital, in other words.
What you're describing is the failed mentality of the early 1980's : the idea that the wealthy are "better" at capital allocation than everyone else. What it leads to is not some utopia, but simply bigger yachts, and more expensive sports teams, and more expensive land, while the human capital of the poor goes neglected and untapped.
What does the most good for living standards is the government investing in humans and households without capital. More broadly distributed capital, in other words.
You have cause and effect backwards. The modern world is not capital constrained because capital formation is (in certain locations) superfluous. When it is not, it is.
> Modern societies are not capital constrained, so capital formation is superfluous
So modern economies are not constrained for money, since money is just paper you can print.
But we are not talking about financial capital, but real capital. E.g. entrepeneurs taking big risks to start businesses instead of just getting some cushy sinecure. And the problem is that although the government can print money, Elon Musk can't. He has to risk his own money and his own time, in order to place big bets. He is the one working 14 hour days, creating new fields, while everyone else tells him it's a crazy idea that will never work.
As you start to punish those people and become angry at them for succeeding (ignoring the massive survival bias) they start saying screw it, and don't make those big bets, or move to a different country and place big bets there.
And it is the ability to organize production in innovative ways that is scarce in the society, not paper and ink to create money. So we should focus our economy on rewarding and encourgaging that type of entrepeneurship, and fostering the growth of productive ecosystems, because that creates the surplus wealth that gives value to the government's paper and ink.
So modern economies are not constrained for money, since money is just paper you can print.
But we are not talking about financial capital, but real capital. E.g. entrepeneurs taking big risks to start businesses instead of just getting some cushy sinecure. And the problem is that although the government can print money, Elon Musk can't. He has to risk his own money and his own time, in order to place big bets. He is the one working 14 hour days, creating new fields, while everyone else tells him it's a crazy idea that will never work.
As you start to punish those people and become angry at them for succeeding (ignoring the massive survival bias) they start saying screw it, and don't make those big bets, or move to a different country and place big bets there.
And it is the ability to organize production in innovative ways that is scarce in the society, not paper and ink to create money. So we should focus our economy on rewarding and encourgaging that type of entrepeneurship, and fostering the growth of productive ecosystems, because that creates the surplus wealth that gives value to the government's paper and ink.
And failing to tax corporations appropriately is unfair to all citizens.
Your grandma bought a house for cheap, you inherited it, and because it's in the silicon valley, that house and the plot is now worth eg. $10mio. Your buddies grandma did the same, but her house is in bumfuck alabama, and it's worth $50k.
Technically you two own the same thing, but you'll get fucked by taxes and he wont.
Why would you be taxed on something you you already paid tax for to buy?
Renting out the house? Sure, get taxed. Selling the house? Sure, get taxed on the price difference. You're growing weed there? Sure, got taxed on profits from that. Otherwise, you never own anything.
Technically you two own the same thing, but you'll get fucked by taxes and he wont.
Why would you be taxed on something you you already paid tax for to buy?
Renting out the house? Sure, get taxed. Selling the house? Sure, get taxed on the price difference. You're growing weed there? Sure, got taxed on profits from that. Otherwise, you never own anything.
Just get a HELOC to pay all the tax. Having a bank own a third of your $10M house puts you way ahead of your buddy who owns 100% of a $50K house.
Curious.
Doesn't this open up the possibility of debt slavery of the entrepreneur, to the government ?
If my stock in my biotech startup goes thru the roof and i get taxed X, i could perhaps sell some stock to cover. More likely, though, I will get into an installment plan with the IRS since the gains are so massive its going to be tough to sell so much stock without a discount, to pay the IRS off.
Next year, FDA does not approve my device, and my stock tanks to near $0. Now even if i sold all my stock, I can't even pay back the IRS for my tax debt.
I now have lost my company, but I have also incurred massive debt in the process. And if I am not mistaken, IRS debt is not dis-chargeable in bankruptcy.
Am I reading this wrong ?
Doesn't this open up the possibility of debt slavery of the entrepreneur, to the government ?
If my stock in my biotech startup goes thru the roof and i get taxed X, i could perhaps sell some stock to cover. More likely, though, I will get into an installment plan with the IRS since the gains are so massive its going to be tough to sell so much stock without a discount, to pay the IRS off.
Next year, FDA does not approve my device, and my stock tanks to near $0. Now even if i sold all my stock, I can't even pay back the IRS for my tax debt.
I now have lost my company, but I have also incurred massive debt in the process. And if I am not mistaken, IRS debt is not dis-chargeable in bankruptcy.
Am I reading this wrong ?
> If my stock in my biotech startup goes thru the roof and i get taxed X, i could perhaps sell some stock to cover.
You don't have to unless your company is publicly traded (or has shares readily tradable in a secondary market), and your personal shares in the company are worth in excess of $1B.
> More likely, though, I will get into an installment plan with the IRS since the gains are so massive its going to be tough to sell so much stock without a discount, to pay the IRS off.
No, you don't have to do that. The law allows you to carry-forward your first payment over 5 years. That's different from a payment plan, because if the stock goes to 0 in year 3, you no longer owe anything.
So, I'd argue you are reading it incorrectly. Tim Sweeny gets a fair bit wrong, and I'd highly recommend starting with the actual legislative text (available here: https://www.finance.senate.gov/chairmans-news/wyden-unveils-...) to get more details on the law.
You don't have to unless your company is publicly traded (or has shares readily tradable in a secondary market), and your personal shares in the company are worth in excess of $1B.
> More likely, though, I will get into an installment plan with the IRS since the gains are so massive its going to be tough to sell so much stock without a discount, to pay the IRS off.
No, you don't have to do that. The law allows you to carry-forward your first payment over 5 years. That's different from a payment plan, because if the stock goes to 0 in year 3, you no longer owe anything.
So, I'd argue you are reading it incorrectly. Tim Sweeny gets a fair bit wrong, and I'd highly recommend starting with the actual legislative text (available here: https://www.finance.senate.gov/chairmans-news/wyden-unveils-...) to get more details on the law.
The idea of this is that private control of companies by independent minded founders should not exist. Only large financial companies like Vanguard and Blackrock should own large stakes in public companies. The practical effect is not to raise more tax revenue, it's to seize control from founders and give it to the financial oligarchy by forcing them to sell.
This is what happens in Russia, Eastern Europe, Saudi Arabia, and other corrupt oligarchies. When a business gets successful enough, the oligarchs of the countries show up and offer a deal that the person running the company can't refuse and force them to sell to the local oligarch gang at a bad price.
If they wanted to raise more tax revenue, they could just raise the top marginal income tax rate up to 98% or raise capital gains tax rates and not totally screw up things by forcing the confiscation of companies from their founders.
This is what happens in Russia, Eastern Europe, Saudi Arabia, and other corrupt oligarchies. When a business gets successful enough, the oligarchs of the countries show up and offer a deal that the person running the company can't refuse and force them to sell to the local oligarch gang at a bad price.
If they wanted to raise more tax revenue, they could just raise the top marginal income tax rate up to 98% or raise capital gains tax rates and not totally screw up things by forcing the confiscation of companies from their founders.
> If they wanted to raise more tax revenue, they could just raise the top marginal income tax rate up to 98% or raise capital gains tax rates
> If tax revenue is too low, just raise the top tax brackets. (Sweeney)
That was the original proposal [0]. Republicans and moderate Democrats shot it down.
Part of me thinks this is the "crazy" option, to actually get motion on increasing top rates and capital gains.
Complaints about those ideas shrink when this is the current alternative.
[0] https://www.nytimes.com/2021/05/28/us/politics/tax-rising-on...
> If tax revenue is too low, just raise the top tax brackets. (Sweeney)
That was the original proposal [0]. Republicans and moderate Democrats shot it down.
Part of me thinks this is the "crazy" option, to actually get motion on increasing top rates and capital gains.
Complaints about those ideas shrink when this is the current alternative.
[0] https://www.nytimes.com/2021/05/28/us/politics/tax-rising-on...
The goal of the legislation is to shift the tax burden towards high net worth individuals, and away from wage-earners.
Raising cap gains rates and/or increasing top marginal income tax rates are not very effective ways to achieve this goal.
Raising cap gains rates and/or increasing top marginal income tax rates are not very effective ways to achieve this goal.
If you have high net worth that means you have control, not that you are necessarily living lavishly. If you want to pay for personal expenses and buy yachts and the usual kinds of things that socialist complain about, you need to take that out in income or through capital gains. Thus, they want to pay for everything by forcing founders to sell control to the country's financial oligarchs like Blackrock and Vanguard who already own large amounts of most public companies.
Blackrock and Vanguard are just intermediaries, they do not actually own the shares in their ETFs, they manage the assets on behalf of clients.
They could easily exert any kind of pressure on these companies though. For example, Blackrock was given exclusive access to do wealth management in China recently[1]. It's one of the few western financial institutions allowed to do so. What kind of influence do you think the Chinese government exerts on Blackrock in exchange for this privilege?
[1]https://www.nasdaq.com/articles/blackrock-expands-china-foot...
[1]https://www.nasdaq.com/articles/blackrock-expands-china-foot...
Or get a loan at a very low rate using equity as collateral thereby avoiding income/cap gains.
No, it's not. Plenty of other people in the thread have explained the contigencies in the legislative text that mean that Sweeney's claims about it are at best misleading and at worst outright wrong.
You're not. There are a lot of good reasons why governments don't implement or keep unrealized capital gains taxes for long.
This isn't true. There are lots of recorded instances of wealth taxes (e.g. France prior to the abolition of the ISF several years ago; many countries which levied temporary wealth taxes after WWII, etc.)
Sweden did the same. A lot of people suffered during the dot com bust because they were taxed on enormous unrealised profits that had completely disappeared by the time they had to pay them (because the stock had tanked)
That happened to a friend of mine in the US. He had a "taxable event" when his stock options vested. By the time the tax bill was due, his stock was worthless, and he went bankrupt.
He lost his home and last I saw was living in an RV.
He lost his home and last I saw was living in an RV.
That's a different situation.
Stock options are the same as having a cash payment, which is then immediately used to purchase the stock.
It's correct to tax stock options when they vest.
> By the time the tax bill was due, his stock was worthless
if you could not afford the tax bill with free cashflow, you need to sell to cover. Not selling means you're taking the tax debt owed, and gambling it on stocks. It sucks that your friend lost everything - often people who have vested stocks don't think about the consequences of what they're doing, and just go for the greediest (and most risky) option of holding and hoping.
Stock options are the same as having a cash payment, which is then immediately used to purchase the stock.
It's correct to tax stock options when they vest.
> By the time the tax bill was due, his stock was worthless
if you could not afford the tax bill with free cashflow, you need to sell to cover. Not selling means you're taking the tax debt owed, and gambling it on stocks. It sucks that your friend lost everything - often people who have vested stocks don't think about the consequences of what they're doing, and just go for the greediest (and most risky) option of holding and hoping.
He did not realize that he would owe income taxes on the difference between the option price and the value of the stock the day he bought it. He thought the option price would be his basis and he'd owe capital gains when he sold the stock.
That was the way things used to be, but Congress had changed the rules.
Quite a few people have been caught unawares by that.
That was the way things used to be, but Congress had changed the rules.
Quite a few people have been caught unawares by that.
There are indeed. And those countries wound up repealing them because of the disastrous effects.
Most evidence suggests that wealth taxes levied in the past have indeed reduced inequality and have not led to the type of tax avoidance their detractors would suggest.
The WSJ points out:
"Complexity is one reason European countries, including France, Germany and Sweden, abandoned broad-based wealth taxes. Many of the rich dodged wealth taxes by exploiting carve-outs or moving. The very rich will find ways to avoid confiscatory taxes, but bad tax policy distorts investment. Sweden abolished its wealth tax in 2007 following an exodus of capital and business tycoons. France repealed its net wealth tax in 2018, estimating that some 10,000 people with 35 billion euros worth of assets had left in the previous 15 years for tax reasons. The government was losing revenue from income taxes that the wealthy would have paid."
https://www.wsj.com/articles/the-democrats-wealth-tax-mirage...
"Complexity is one reason European countries, including France, Germany and Sweden, abandoned broad-based wealth taxes. Many of the rich dodged wealth taxes by exploiting carve-outs or moving. The very rich will find ways to avoid confiscatory taxes, but bad tax policy distorts investment. Sweden abolished its wealth tax in 2007 following an exodus of capital and business tycoons. France repealed its net wealth tax in 2018, estimating that some 10,000 people with 35 billion euros worth of assets had left in the previous 15 years for tax reasons. The government was losing revenue from income taxes that the wealthy would have paid."
https://www.wsj.com/articles/the-democrats-wealth-tax-mirage...
Sure, some people will move their assets around in order to avoid wealth taxes (to which there are, of course, solutions). That being said, in France revenue from the wealth tax grew at more than twice the rate of GDP from 1990-2018. Which means that even though some people were avoiding the tax, and oversight was extremely lax, there's no evidence that it was being serially evaded. And this is in the context of the European Union, perhaps the most hostile environment to wealth taxes that you can imagine given the free flows of people and capital.
Note the part about the wealth taxes generated less revenue than the ordinary income taxes would have, since the rich left the country.
The fact is, those wealth taxes were repealed. Because they didn't work.
The fact is, those wealth taxes were repealed. Because they didn't work.
First, I assume the estimates on capital flight in the WSJ are based on Pichet's 2007 paper, which makes a number of huge assumptions to arrive at its estimate. This isn't necessarily a criticism, more a statement that there isn't a lot of good evidence and other approaches to estimation yield much more modest sums.
Second, the article does not say that "the wealth taxes generated less revenue than the ordinary income taxes would have." It says that "the government was losing revenue from income taxes that the wealthy would have paid." There isn't a comparison there. Sure, the government was losing some revenue from income taxes, but nothing on the order of magnitude of the revenue brought in by the ISF. Those who are extremely wealthy actually do not tend to pay much in income taxes, especially outside of the US where top salaries are significantly lower.
Third, the assertion of widespread capital flight in France is provably false. If we look at French national accounts, the larger a fortune (and therefore the greater percentage of which is made up of financial assets), the more it grew relative to smaller estates (which are predominantly composed of property). Under the hypothesis of capital flight, we'd expect to see exactly the opposite.
Fourth, the effectiveness of the wealth tax had nothing to do with its repeal - it had to do, in large part, with the specific politics of the internationalist-global coalition that Macron spearheaded.
Fifth, even if capital flight becomes an important concern (and I do believe it is important, simply not at the level that is often cited), there are plenty of ways it can be circumvented, especially given the very different dynamics of the US tax system and the US place in the world.
Second, the article does not say that "the wealth taxes generated less revenue than the ordinary income taxes would have." It says that "the government was losing revenue from income taxes that the wealthy would have paid." There isn't a comparison there. Sure, the government was losing some revenue from income taxes, but nothing on the order of magnitude of the revenue brought in by the ISF. Those who are extremely wealthy actually do not tend to pay much in income taxes, especially outside of the US where top salaries are significantly lower.
Third, the assertion of widespread capital flight in France is provably false. If we look at French national accounts, the larger a fortune (and therefore the greater percentage of which is made up of financial assets), the more it grew relative to smaller estates (which are predominantly composed of property). Under the hypothesis of capital flight, we'd expect to see exactly the opposite.
Fourth, the effectiveness of the wealth tax had nothing to do with its repeal - it had to do, in large part, with the specific politics of the internationalist-global coalition that Macron spearheaded.
Fifth, even if capital flight becomes an important concern (and I do believe it is important, simply not at the level that is often cited), there are plenty of ways it can be circumvented, especially given the very different dynamics of the US tax system and the US place in the world.
> the article does not say that "the wealth taxes generated less revenue than the ordinary income taxes would have."
The loss of income tax revenue from the departure of the wealthy was twice as much as the revenue generated from the wealth tax from all of those who didn't leave. Therefore the tax was a net negative, hurting French finances to the tune of 7 billion euros of lost revenue as a result of the tax[2]
"The revenue it raised was rather paltry; only a few billion euros at its peak, or about 1% of France’s total revenue from all taxes. At least 10,000 wealthy people left the country to avoid paying the tax; most moved to neighboring Belgium, which has a large French-speaking population. When these individuals left, France lost not only their wealth tax revenue but their income taxes and other taxes as well. French economist Eric Pichet estimates that this ended up costing the French government almost twice as much revenue as the total yielded by the wealth tax."[1]
> Those who are extremely wealthy actually do not tend to pay much in income taxes, especially outside of the US
In France they certainly do, but they did not pay much in wealth taxes due to the difficulty in collecting the tax.
And here we have the main problem. Perhaps there is debate about how many tax refugees left and how much capital left the country -- that's fine.
But is the purpose of the tax to hurt the rich or is the purpose of the tax to raise money?
There is no debate about how much money the tax raised, regardless of whether you agree with Pichet's study. The money raised is known and was just 5.2 billion euros in 2015[2]. For all of France - a nation whose 2015 GDP was 2.2 Trillion euros. And this was a tax valued at 0.5% for all wealth above 1.3 million and an extra 1% for wealth above 10 million euros (so two rates of .5% and 1.5%). So even if you disagree that the net effect was negative because you don't agree with Pichet's methodology, there is no disputing the tax was ineffective at raising money.
[1] https://www.bnnbloomberg.ca/france-tried-soaking-the-rich-it...
[2] https://www.investorschronicle.co.uk/education/2021/02/11/le...
The loss of income tax revenue from the departure of the wealthy was twice as much as the revenue generated from the wealth tax from all of those who didn't leave. Therefore the tax was a net negative, hurting French finances to the tune of 7 billion euros of lost revenue as a result of the tax[2]
"The revenue it raised was rather paltry; only a few billion euros at its peak, or about 1% of France’s total revenue from all taxes. At least 10,000 wealthy people left the country to avoid paying the tax; most moved to neighboring Belgium, which has a large French-speaking population. When these individuals left, France lost not only their wealth tax revenue but their income taxes and other taxes as well. French economist Eric Pichet estimates that this ended up costing the French government almost twice as much revenue as the total yielded by the wealth tax."[1]
> Those who are extremely wealthy actually do not tend to pay much in income taxes, especially outside of the US
In France they certainly do, but they did not pay much in wealth taxes due to the difficulty in collecting the tax.
And here we have the main problem. Perhaps there is debate about how many tax refugees left and how much capital left the country -- that's fine.
But is the purpose of the tax to hurt the rich or is the purpose of the tax to raise money?
There is no debate about how much money the tax raised, regardless of whether you agree with Pichet's study. The money raised is known and was just 5.2 billion euros in 2015[2]. For all of France - a nation whose 2015 GDP was 2.2 Trillion euros. And this was a tax valued at 0.5% for all wealth above 1.3 million and an extra 1% for wealth above 10 million euros (so two rates of .5% and 1.5%). So even if you disagree that the net effect was negative because you don't agree with Pichet's methodology, there is no disputing the tax was ineffective at raising money.
[1] https://www.bnnbloomberg.ca/france-tried-soaking-the-rich-it...
[2] https://www.investorschronicle.co.uk/education/2021/02/11/le...
if you tax unrealized capital gains, it's only fair to return unrealized losses. so
> stock tanks to near $0
means you get all your paid tax back.
> stock tanks to near $0
means you get all your paid tax back.
I think that the proposal is, much as with taxes on realized gains and losses, unrealized losses would be allowed to offset unrealized gains and be carried forward if there was an excess of losses.
Ouch. If I understand you correctly, this is then a really awful scenario for founders.
As a founder, my only assets were the stock of my company . I don't own any other stock, certainly none that would go thru the roof over a year or 2.
If the company goes south after a hot streak, I end up with excess unrealized losses that I can't use, because I have no other assets with unrealized gains to book against my carryforward losses.
As a founder, my only assets were the stock of my company . I don't own any other stock, certainly none that would go thru the roof over a year or 2.
If the company goes south after a hot streak, I end up with excess unrealized losses that I can't use, because I have no other assets with unrealized gains to book against my carryforward losses.
I am not an accountant, but I believe this to indeed be the case. If you previously took losses, you can carry them forward but not get an actual refund. It might not be practical to do because what tax bracket do you use? It's simpler as an offset, so I guess they just have to pick a rule and so they picked one that is advantageous to them.
The only other option that comes to mind is that if you take a significant loss, you get to retroactively get refunded from a previous year. This actually doesn't seem that intractable, it shouldn't be all that complicated to implement.
The only other option that comes to mind is that if you take a significant loss, you get to retroactively get refunded from a previous year. This actually doesn't seem that intractable, it shouldn't be all that complicated to implement.
> If I understand you correctly, this is then a really awful scenario for founders.
It makes having all your eggs in one basket (very slightly) worse than the generally bad idea it already is (if its a billion dollar basket so that you qualify for this treatment in the first place.)
But if all your eggs are in that basket, either the company bounces back later or you are wiped out anyway, so its not that much of a change from the status quo in that respect.
Not that I like the proposal, mind you
It makes having all your eggs in one basket (very slightly) worse than the generally bad idea it already is (if its a billion dollar basket so that you qualify for this treatment in the first place.)
But if all your eggs are in that basket, either the company bounces back later or you are wiped out anyway, so its not that much of a change from the status quo in that respect.
Not that I like the proposal, mind you
> As a founder, my only assets were the stock of my company . I don't own any other stock, certainly none that would go thru the roof over a year or 2.
- Is it a publicly traded company? Or do you readily trade shares of it on the secondary market? If not, then you wouldn't owe any taxes under this scheme, which only applies to "tradable covered assets" (leg. text is here: https://www.finance.senate.gov/chairmans-news/wyden-unveils-...)
- Are your personal shares of the company worth > $1B? If not, then you also wouldn't owe any taxes under this scheme, which allows you to designate up to $1B of normally "tradable covered assets" as "non-tradable covered assets".
- Is it a publicly traded company? Or do you readily trade shares of it on the secondary market? If not, then you wouldn't owe any taxes under this scheme, which only applies to "tradable covered assets" (leg. text is here: https://www.finance.senate.gov/chairmans-news/wyden-unveils-...)
- Are your personal shares of the company worth > $1B? If not, then you also wouldn't owe any taxes under this scheme, which allows you to designate up to $1B of normally "tradable covered assets" as "non-tradable covered assets".
Which opens the government up to actually having to pay back substantial sums from the IRS, in the event of an equity downturn.
that's going to wreak havoc on finances during a recession. if the economy goes to shit, the government has to come up with money to stimulate the economy AND pay back all the capital gains taxes they collected during the boom times, all while tax revenues are down because businesses are imploding.
which is why academic professionals such as Aswath Damodaran say that this law is a bit stupid, and poorly thought out - it appeals to popular mindset, but it would be ineffective at collecting new tax revenue, and at worst discourage entrepreneurship leading to long term damage.
https://www.youtube.com/watch?v=lQddA58hZdQ
https://www.youtube.com/watch?v=lQddA58hZdQ
> that's going to wreak havoc on finances during a recession.
No, among other reasons, because its not going to happen, just as it doesn't with the taxes on realized capital gains and losses, where losses can offset gains, and if there is excess a certain amount of regular income, and if there is still excess (or not enough taxable regular income to use the full offset) end up as carryforward losses that can be used as future-year losses, but don't result in negative liability on their own.
> if the economy goes to shit, the government has to come up with money to stimulate the economy AND pay back all the capital gains taxes they collected during the boom times
If they were to write the law so that unrealized capital losses resulted in tax refunds, that would be stimulus, not an extra thing on top or stimulus. It might not be optimally targeted stimulus, but that rarely happens, anyway.
No, among other reasons, because its not going to happen, just as it doesn't with the taxes on realized capital gains and losses, where losses can offset gains, and if there is excess a certain amount of regular income, and if there is still excess (or not enough taxable regular income to use the full offset) end up as carryforward losses that can be used as future-year losses, but don't result in negative liability on their own.
> if the economy goes to shit, the government has to come up with money to stimulate the economy AND pay back all the capital gains taxes they collected during the boom times
If they were to write the law so that unrealized capital losses resulted in tax refunds, that would be stimulus, not an extra thing on top or stimulus. It might not be optimally targeted stimulus, but that rarely happens, anyway.
Yes, you're reading this wrong. Referring to tax obligations as "Slavery" is disconnected from reality, and pretty insulting to all the Americans for whom real, actual American slavery is still impactful.
[deleted]
Imagine if that was policy during the dotcom boom and bust.
Bad idea to tax unrealized capital gains. Proposal; How about we gut our entire tax code and replace it with a single tax that taxes when money moves from one entity to another. Let's call it a Transaction Tax. It would replace Sales Tax, Income Tax, Capital Gains Tax, Inheritance Tax, etc and introduce tax on debt creation (when the bank gives you the money). This would close all loop holes and put the entire tax industry out of business. Given it would be taking a slice of every transaction, the rate could probably be super low. 1-2% would be my guess. What can you see wrong with this proposal?
Brazil had such a tax for a long time. It was sub-1%, and was largely agreed as a bad model, since it led to lower liquidity, drying of credit markets, lower consumption, cash hoarding, etc. So not necessarily a great idea.
https://www.researchgate.net/publication/249882612_The_Econo...
https://www.researchgate.net/publication/249882612_The_Econo...
> cash hoarding
That used to be called saving and it was considered a good thing. Lower consumption would be better for the environment as well.
That used to be called saving and it was considered a good thing. Lower consumption would be better for the environment as well.
No, _saving_ is when you put money aside and hopefully keep its value at least above inflation. Cash hoarding means individuals and businesses stash bills under the mattress, and business will even decline to sell you anything on credit. And of course, that money devalues with inflation, so it’s not useful as a savings mechanism.
Saving is when you put your money in the bank, who then loan it out to businesses and homebuyers.
Putting cash under your mattress just takes it out of circulation.
Putting cash under your mattress just takes it out of circulation.
This conveys a misunderstanding of money creation. The bank specifically does not need your cash to make loans; that is in fact what makes it a bank. However, putting your cash inside your mattress withholds your funds from the investment manager, who would or could invest it in risk assets.
They need the money to lend. Otherwise they couldn't give you money. Tge holy grail of any lender is being able to get money from consumers. So they can lend that same money (I e. You dont have to get a credit line to get money you'll lend)
That's the reason countries have made regulations that I sure money you deposit in your bank (FDIC in the USA?) : if banks screw up with crazy debt, your money is still safe. In Mexico one way it works is that banks must keep x% of the lent money available.
That's the reason countries have made regulations that I sure money you deposit in your bank (FDIC in the USA?) : if banks screw up with crazy debt, your money is still safe. In Mexico one way it works is that banks must keep x% of the lent money available.
Responding to all of the responses here: this is not correct. Banks explicitly do not 'need money' to lend. They need equity to maintain their capital adequacy ratio to be able to lend. Banks literally beget money and are governed only by regulation. Non-bank institutions cannot do so. Deposits are merely a less-expensive-than-'fed-funds' liability. Here to understand this popular misconception: https://news.ycombinator.com/item?id=28473807
> The bank specifically does not need your cash to make loans
They do: the more money a bank has, the more they can loan.
They do: the more money a bank has, the more they can loan.
A bank can't make loans with assets AKA deposits.
US taxes unrealized capital gains as well: NSO and AMT on ISO.
Because it fails to sate the emotional rationalization that sits behind so much of the rhetoric that has been used to justify such measures. The wealthy are evil, duplicitous, exploitative, and in the best cases, merely lucky... regardless of what a wealthy person actually did or didn't do to come to their wealth... and the not wealthy are blameless, innocent, unlucky victims that are unable to change their lot in life in part because of the oppression of the wealthy and in part because their betters in government aren't yet empowered enough to protect their best interests.... again all without regard to how they came to their unfortunate lot in life.
Now, of course, I'm exaggerating, but only a little I think. And, of course, this happens on both sides of the debate... but the side in power right now is the one making taxation proposals. Personally, I support your idea by and large. An amount that scales to the degree of the transaction ensures that big transactions pay larger amounts and that everyone has a stake.
Now, of course, I'm exaggerating, but only a little I think. And, of course, this happens on both sides of the debate... but the side in power right now is the one making taxation proposals. Personally, I support your idea by and large. An amount that scales to the degree of the transaction ensures that big transactions pay larger amounts and that everyone has a stake.
You are not wrong. The only thing I would add to that is the wealthy invariably means simply "much richer than me". In particular it is obscene to see that the people who most hate billionaires and agitate for their punishment are, for the most part, millionaires. The whole movement is rooted in envy, transparently disguised as virtue.
I highly doubt the majority of people agitating against billionaires are millionaires. There aren’t enough millionaires for that to be likely. And I think there are lots of good arguments being made about the detriments of income inequality if you don’t dismiss the people making them as envious out of hand...
There are millions of millionaires in the US. A lot of fairly normal doctors, lawyers, and engineers will reach this bar by late middle age if they're saving and investing part of their income.
Very cursory search suggests 8% of US adults are millionaires according to CNBC. That means there's something like 300 million non-millionaires compared to 30 million millionaires.
The rate of "billionaire hate" would need to be astronomically higher among millionaires than non-millionaires for millionaires to make up any sort of the majority of people complaining about income inequality.
On top of that, NPR polling suggest about 45% of top 1% income earners on up to about 65% of low income earners (>$35k household) are concerned about income inequality, which flies in the face of the idea that it's mostly jealous millionaires complaining up. A majority of every income segment in America other than the top 1% believes this is a problem.
The rate of "billionaire hate" would need to be astronomically higher among millionaires than non-millionaires for millionaires to make up any sort of the majority of people complaining about income inequality.
On top of that, NPR polling suggest about 45% of top 1% income earners on up to about 65% of low income earners (>$35k household) are concerned about income inequality, which flies in the face of the idea that it's mostly jealous millionaires complaining up. A majority of every income segment in America other than the top 1% believes this is a problem.
I didn't mean to suggest that millionares are a majority in the US. But they may well be a majority of those with the time, energy, money, and influence to meaningfully invest into political activities. A majority of those elected to Congress, including major wealth tax pushers Elizabeth Warren and Bernie Sanders, are millionares.
Broke people everywhere may harbor resentment toward the ultrarich, but it wouldn't be the national dialog we're having if millionaires in Congress and their millionaire friends in media didn't find it politically advantageous to turn billionaires into boogeymen.
Broke people everywhere may harbor resentment toward the ultrarich, but it wouldn't be the national dialog we're having if millionaires in Congress and their millionaire friends in media didn't find it politically advantageous to turn billionaires into boogeymen.
Broke people everywhere have no use for the distinction between millionaire and billionaire. They are one and the same for those of us that cannot pay their credit card debt. As you say, its patently obvious that the people actually doing the most strident complaining are the members of the virtue signaling, chattering, millionaire class. Since they are complaining on behalf of the poor masses they get to act out their resentment while displaying their virtue. Win, win.
[deleted]
> The whole movement is rooted in envy, transparently disguised as virtue.
Our whole economic system is itself grounded in the vicious promotion of the parochial interest of the capitalist, née mercantile, class, rooted in their envy of the privileges previously enjoyed by the feudal aristocracy, dressed up as virtue.
The capitalist class is now in the position the feudal aristocracy was in when the movement toward capitalism was young, for much the same reason.
Our whole economic system is itself grounded in the vicious promotion of the parochial interest of the capitalist, née mercantile, class, rooted in their envy of the privileges previously enjoyed by the feudal aristocracy, dressed up as virtue.
The capitalist class is now in the position the feudal aristocracy was in when the movement toward capitalism was young, for much the same reason.
So having suppliers instead of being vertically integrated gets taxed repeatedly.
This is the whole reason the VAT taxes value added, not the whole transaction.
I have to wonder whether you’ve even looked at existing tax systems, or spent any time sketching out what the consequences of yours might be.
This is the whole reason the VAT taxes value added, not the whole transaction.
I have to wonder whether you’ve even looked at existing tax systems, or spent any time sketching out what the consequences of yours might be.
> So having suppliers instead of being vertically integrated gets taxed repeatedly.
Yes. But maybe having a long chain of suppliers is worth a tax penalty.
The vertically integrated company has a stronger incentive to stay solvent.
I’m thinking particularly about construction businesses here.
Yes. But maybe having a long chain of suppliers is worth a tax penalty.
The vertically integrated company has a stronger incentive to stay solvent.
I’m thinking particularly about construction businesses here.
It'd net out to a consumption tax which is strongly negative economically to nearly everyone.
If it leads to lower consumption that would be better for the environment and would probably lead to a more sustainable economy with less incentive to go into debt.
Sales tax is regressive, meaning that it taxes the poor at a much higher relative tax rate than the rich.
Any transaction tax would need to take that into account.
Any transaction tax would need to take that into account.
Does the tax apply when money moves from one entity I control to another entity I control?
If so, that's clearly a problem.
If not, that's definitely a different set of problems.
Everything seems simple at first, and then it isn't. Every change in taxation rewards some behaviors and punishes others. Either your proposal would result in more tax revenue or less, either of which is a problem for someone, Maybe many someones.
The most obvious issue with the tax structure you describe--aside from who controls which entities--is that it is one of the most regressive tax policies I can imagine. Those at or near the poverty line would now be paying a percentage of everything they earn, while those earning far more would be paying that percentage on only a small subset of their earnings. Considered another way, while this seems mathematically equal, it's most burdensome on those with the least ability to afford it.
If so, that's clearly a problem.
If not, that's definitely a different set of problems.
Everything seems simple at first, and then it isn't. Every change in taxation rewards some behaviors and punishes others. Either your proposal would result in more tax revenue or less, either of which is a problem for someone, Maybe many someones.
The most obvious issue with the tax structure you describe--aside from who controls which entities--is that it is one of the most regressive tax policies I can imagine. Those at or near the poverty line would now be paying a percentage of everything they earn, while those earning far more would be paying that percentage on only a small subset of their earnings. Considered another way, while this seems mathematically equal, it's most burdensome on those with the least ability to afford it.
Would it tax loans? If not, how do you tax billionaires who never sell their stock and just get loans with their stock as collateral. How bezos pays minimal taxes without having realize gains by selling his stock.
> Would it tax loans?
“introduce tax on debt creation (when the bank gives you the money).”
> If not, how do you tax billionaires who never sell their stock and just get loans with their stock as collateral.
Depending on how serious you are about taxing gross transfers, giving a collateral interest is also a transfer of interest in money, so you could tax that, too. Valuing the collateral interest could be tricky, though.
“introduce tax on debt creation (when the bank gives you the money).”
> If not, how do you tax billionaires who never sell their stock and just get loans with their stock as collateral.
Depending on how serious you are about taxing gross transfers, giving a collateral interest is also a transfer of interest in money, so you could tax that, too. Valuing the collateral interest could be tricky, though.
The loan eventually must be repaid. If it's repaid after death, a 40% federal estate tax (+16% if you're in NY or CA) takes it's cut.
I'm not sure who originated this "loans are an infinite money cheat" narrative, but I've been seeing it all over the internet recently and it's simply not true.
I'm not sure who originated this "loans are an infinite money cheat" narrative, but I've been seeing it all over the internet recently and it's simply not true.
[deleted]
> It doesn’t apply to shares held by hedge funds like KKR, nor to corporate investors like Tencent and Sony.
If that's the case, then what prevents billionaires like him from creating "Tim Sweeney angel fund LLC" and have that entity retain control of Epic?
Then since this entity is private, couldn't it defer that tax at the time it sells the entity?
With the whole deferred tax scheme that applies to assets not traded on an exchange, i.e. a "deferral charge meant to replicate interest payments on taxes that went unpaid each year, together totalling a tax capped at 49%" as described in https://www.rollcall.com/2021/10/27/wyden-details-proposed-t...
If that's the case, then what prevents billionaires like him from creating "Tim Sweeney angel fund LLC" and have that entity retain control of Epic?
Then since this entity is private, couldn't it defer that tax at the time it sells the entity?
With the whole deferred tax scheme that applies to assets not traded on an exchange, i.e. a "deferral charge meant to replicate interest payments on taxes that went unpaid each year, together totalling a tax capped at 49%" as described in https://www.rollcall.com/2021/10/27/wyden-details-proposed-t...
Indeed, whatever conditions there are on this tax, will become the new standard conditions all sufficiently wealthy people will have their accountants arrange their finances to satisfy in order to be excluded.
LLC are discarded entities for tax purposes so no change there. The reason it’s not an issue for hedge funds is ownership is split among many non billionaire owners. As opposed to llcs, setting up a shell corporation for stock holdings would lead to accumulated earnings tax. I think you will see some asset hiding as always but the obvious solution is the Peter Thiel billion dollar Roth IRA trick. Assuming roths are excluded I mean.
Because his shares on "Tim Sweeney angel fund LLC" would appreciate every year and he'd have to pay the same taxes on unrealized gains.
The only way to avoid this is being a foreigner.
Effectively, what they'll accomplish with this tax is either:
1) Letting only foreign billionaires control American companies; or 2) Force American entrepreneurs to waive their citizenship (which, in practice, is #1).
So, yeah, it seems these politicians are either blind or are legislating against American entrepreneurship, in favor of foreign billionaires.
The only way to avoid this is being a foreigner.
Effectively, what they'll accomplish with this tax is either:
1) Letting only foreign billionaires control American companies; or 2) Force American entrepreneurs to waive their citizenship (which, in practice, is #1).
So, yeah, it seems these politicians are either blind or are legislating against American entrepreneurship, in favor of foreign billionaires.
[deleted]
Okay, doesn't it feel crazy that we're just throwing ideas out there and if it seems to justify the spending for something totally unrelated, it'll have a reasonable chance of becoming literally the highest law of the land?
Maybe it's because I'm not in the room, but this feels incredibly slapdash for something so incredibly important.
Maybe it's because I'm not in the room, but this feels incredibly slapdash for something so incredibly important.
> we're just throwing ideas out there
This language was proposed by Wyden at least two years ago, and has gone through multiple rounds of refinements. (For example, the original text didn’t exempt private assets.) It’s not unrelated because income taxes are how we pay for general expenses in this country. (Granted, limiting it to billionaires always struck me as a way to make it palatable for a lower, e.g. $10mm, threshold.)
This language was proposed by Wyden at least two years ago, and has gone through multiple rounds of refinements. (For example, the original text didn’t exempt private assets.) It’s not unrelated because income taxes are how we pay for general expenses in this country. (Granted, limiting it to billionaires always struck me as a way to make it palatable for a lower, e.g. $10mm, threshold.)
Basically they're trying to figure out how to increase revenue while still being able to claim they're not increasing personal income or corporate tax rates. That's why theyre also looking at schemes like reducing maximum retirement contributions- it's technically not a tax increase, it's just a change that increases the taxes you'll have to pay in retirement
> if it seems to justify the spending for something totally unrelated
Income taxes pay for almost everything; should they only pay for things related to income? I don't understand that.
Income taxes pay for almost everything; should they only pay for things related to income? I don't understand that.
Technically only half [0].
And my point is I would expect something more thought through than trotting out each legislator's favorite pet taxation overhaul. A few days to consider amongst the options doesn't really seem like enough time, but I guess we're still talking about "a framework" so there will be more time. They're not attempting to pass any of this right now.
[0] - https://www.taxpolicycenter.org/briefing-book/what-are-sourc...
And my point is I would expect something more thought through than trotting out each legislator's favorite pet taxation overhaul. A few days to consider amongst the options doesn't really seem like enough time, but I guess we're still talking about "a framework" so there will be more time. They're not attempting to pass any of this right now.
[0] - https://www.taxpolicycenter.org/briefing-book/what-are-sourc...
The options have been considered and developed for years, decades even. There should be public debate, but these aren't new ideas that some novices are pulling out of a hat.
How would I be able to verify that? It seems like these are not very well considered options, based on my limited view.
I know it because I've read about them for years. Keep up on public affairs; it's sometimes almost impossible to show up at the last minute and be informed.
Well that's the thing; I do keep pretty well up with public affairs, and from what I can tell, most of these ideas come from academia, but without much rigor or data to support these new taxation plans, and the legislators who support them do so for largely un-scientific reasons (e.g. has a good hook for a title).
So when I say this all seems slapdash, I mean that I'm thoroughly unimpressed with the way by which these taxation plans are coming out of the woodwork. Feels like an episode of West Wing, the one with the Cartographers for Social Equity.
So when I say this all seems slapdash, I mean that I'm thoroughly unimpressed with the way by which these taxation plans are coming out of the woodwork. Feels like an episode of West Wing, the one with the Cartographers for Social Equity.
If you want to keep up on it, a great source is The Economist. They have a strong free market bias (it is the solution to all things) but they provide serious analysis, including serious economics, accessibly and succinctly. Paul Krugman is good too, when he writes an article on economics - he clearly distinguishes his political preferences from the economics, and presents all serious sides of economic debates (and he has a Nobel Prize in economics).
> from what I can tell, most of these ideas come from academia, but without much rigor or data to support these new taxation plans, and the legislators who support them do so for largely un-scientific reasons (e.g. has a good hook for a title)
Can you give some examples? I think it's too easy to deride everything and everyone; some are good and some are bad ideas.
I agree that policy inevitably goes through the filter of politics, though I think that's essential: The economists who designed the policy cannot know the needs of people in District 9 of North Carolina, and human nature is to designate inconvenient needs of others as nice-to-have, but unnecessary category. (That's how, IMHO, so many policies benefit the wealthy but not working class or poor: It's wealthy people making the policies.)
Of course, that can go too far. We won't get perfect laws.
> from what I can tell, most of these ideas come from academia, but without much rigor or data to support these new taxation plans, and the legislators who support them do so for largely un-scientific reasons (e.g. has a good hook for a title)
Can you give some examples? I think it's too easy to deride everything and everyone; some are good and some are bad ideas.
I agree that policy inevitably goes through the filter of politics, though I think that's essential: The economists who designed the policy cannot know the needs of people in District 9 of North Carolina, and human nature is to designate inconvenient needs of others as nice-to-have, but unnecessary category. (That's how, IMHO, so many policies benefit the wealthy but not working class or poor: It's wealthy people making the policies.)
Of course, that can go too far. We won't get perfect laws.
Nice! I read The Economist weekly (the old fashioned way, from the mail), as well as WSJ, WaPo, NYT, Newsweek, probably ~40 articles a day from Memeorandum, whatever dreck gets put on Twitter, here, and Reddit. I've also got a handful of daily newsletters I subscribe to that I usually get through most of, as well. I'm a bit of a news junky. :)
I don't really have time today to compile a list of proposed tax legislation and their sources (or what I think of those plans), but reading through just the Wyden proposal [0], I can already see more of the "this guy agrees with me politically" crowd coming out than any real example of what Wyden bases this plan on. You've got the bill text, a summary of each section, and a summary of the bill, but no "and here's why we think this". Just the usual "WORKING AMERICANS NEED THIS" filler text that every bill has.
My point is that the "filter of politics" is exhausting and not necessary (to this degree). I do not think it's okay to propose legislation without explaining why it will do what you say, rather than some other thing. We're needlessly rushing the process
[0] - https://www.finance.senate.gov/chairmans-news/wyden-unveils-...
I don't really have time today to compile a list of proposed tax legislation and their sources (or what I think of those plans), but reading through just the Wyden proposal [0], I can already see more of the "this guy agrees with me politically" crowd coming out than any real example of what Wyden bases this plan on. You've got the bill text, a summary of each section, and a summary of the bill, but no "and here's why we think this". Just the usual "WORKING AMERICANS NEED THIS" filler text that every bill has.
My point is that the "filter of politics" is exhausting and not necessary (to this degree). I do not think it's okay to propose legislation without explaining why it will do what you say, rather than some other thing. We're needlessly rushing the process
[0] - https://www.finance.senate.gov/chairmans-news/wyden-unveils-...
Sorry, I misunderstood you about what you read. Now I'd like to know how you have time! If you have any highly efficient curated news aggregation (high value information, generally non-partisan), I'd love to know.
> My point is that the "filter of politics" is exhausting and not necessary (to this degree). I do not think it's okay to propose legislation without explaining why it will do what you say, rather than some other thing. We're needlessly rushing the process
I agree with all that, other than rushing the process. These bills have been discussed for a long time, the tax debates are old (even if not appropriately explained), and the impact of delay is substantial, including reducing the chance of getting anything at all done. The alternative may be 'nothing'.
> My point is that the "filter of politics" is exhausting and not necessary (to this degree). I do not think it's okay to propose legislation without explaining why it will do what you say, rather than some other thing. We're needlessly rushing the process
I agree with all that, other than rushing the process. These bills have been discussed for a long time, the tax debates are old (even if not appropriately explained), and the impact of delay is substantial, including reducing the chance of getting anything at all done. The alternative may be 'nothing'.
> If you have any highly efficient curated news aggregation (high value information, generally non-partisan), I'd love to know.
Hah! Literally exactly the thing I'd like to build (productize my process, attach relevant metadata for filtering/sorting, imagine being able to "dial in" your partisan feed to get a sense of what each wing is saying) when I somehow do find some time. I've been spewing ideas at my wife about it for over a year now, but life circumstances threw me in a different direction temporarily.
Hah! Literally exactly the thing I'd like to build (productize my process, attach relevant metadata for filtering/sorting, imagine being able to "dial in" your partisan feed to get a sense of what each wing is saying) when I somehow do find some time. I've been spewing ideas at my wife about it for over a year now, but life circumstances threw me in a different direction temporarily.
I expect to see a lot of crazy selfdestructive, self-sabotaging schemes from the USA during the remainder of the attempt at empire, which I expect to last the entirety of the rest of my life.
Most of the up and coming interesting industries that have been happening in the last ten years are mostly happening outside of the USA, and this trend will only continue as it becomes harder and harder to operate there.
Most of the up and coming interesting industries that have been happening in the last ten years are mostly happening outside of the USA, and this trend will only continue as it becomes harder and harder to operate there.
Curious to know what up and coming industries you mean?
Cryptocurrencies, advanced semiconductors, and cheap per-passenger rail/aircraft.
USA is winning on rockets and EVs but that is 100% because of one person and not wider US policy (and I assume most of his production of the latter will be non-US within 5 years).
USA is winning on rockets and EVs but that is 100% because of one person and not wider US policy (and I assume most of his production of the latter will be non-US within 5 years).
Samsung (South Korea), TSMC (Taiwan) and Intel (US, Israel) locate their fabs in small countries that are heavily dependent on the US for ensuring their neighbors do not attack.
Two of those three (TSMC & Intel) are building fabs in Arizona due to political pressure, hefty subsidies and geological stability of the area (reducing the number of defects in chips).
Two of those three (TSMC & Intel) are building fabs in Arizona due to political pressure, hefty subsidies and geological stability of the area (reducing the number of defects in chips).
The fabs in AZ are them fishing for ultra massive government handouts.
I'll believe it when I see it if the things actually start producing chips within a couple decades.
I'll believe it when I see it if the things actually start producing chips within a couple decades.
You don't think AZ already has a massive fab industry? What is so hard to believe about two more fabs opening up to add to the four Intel already has in the state, together with the new fab already opened by NXP? It's true that Motorola shut down it's old plant in Mesa, but still there is a large workforce in the area.
https://www.allaboutcircuits.com/news/semiconductor-fabs-dot...
https://www.phonearena.com/news/construction-of-tsmc-5nm-fab...
https://www.allaboutcircuits.com/news/semiconductor-fabs-dot...
https://www.phonearena.com/news/construction-of-tsmc-5nm-fab...
> USA is winning on rockets and EVs but that is 100% because of one person and not wider US policy
The US has been far ahead in space since the 1960s, and advanced work in space is by NASA (and contractors). SpaceX has advanced orbital launches.
The US is the leader in many, many industries, including IT.
The US has been far ahead in space since the 1960s, and advanced work in space is by NASA (and contractors). SpaceX has advanced orbital launches.
The US is the leader in many, many industries, including IT.
The current tax situation is like property taxes in California before Prop 19: nobody sells, so ownership and control never changes. This facilitates wealth transfer from generation to generation (in the equity case, though the use of trusts) and perpetuates wealth inequality.
Except there’s a 40% estate tax still levied at each generation. Plus unlike European aristocracy, American plutocrats rarely intermarry. Even if you’re only reproducing at replacement, your wealth gets diluted by 50% each generation. Stack the two and you’re getting slashed by 80% every generation.
Don’t take my word for it. How many fourth generational heirs do we see among America’s wealthiest billionaires? Essentially zero.
Don’t take my word for it. How many fourth generational heirs do we see among America’s wealthiest billionaires? Essentially zero.
There are ways around this in the UK system, however. It's probably the same case in the US. The short of it is you transfer the wealth well before (15-20 years) the death occurs, thus there is no inheritance.
This was used recently by an MP.
That being said I agree with your thoughts, however:
> How many fourth generational heirs do we see among America’s wealthiest billionaires? Essentially zero.
This is probably true but I'd like to ask the question: how many of them simply inherit a lot of money without any of the fame associated with it, and just go unnoticed? I've met such a person, actually.
EDIT: https://www.bbc.com/news/business-36009963 - this is what I was thinking about.
This was used recently by an MP.
That being said I agree with your thoughts, however:
> How many fourth generational heirs do we see among America’s wealthiest billionaires? Essentially zero.
This is probably true but I'd like to ask the question: how many of them simply inherit a lot of money without any of the fame associated with it, and just go unnoticed? I've met such a person, actually.
EDIT: https://www.bbc.com/news/business-36009963 - this is what I was thinking about.
> There are ways around this in the UK system, however. It's probably the same case in the US. The short of it is you transfer the wealth well before (15-20 years) the death occurs, thus there is no inheritance.
So, you pay gift taxes instead.
Unless you use fake business transactions.
So, you pay gift taxes instead.
Unless you use fake business transactions.
> How many fourth generational heirs do we see among America’s wealthiest billionaires? Essentially zero.
Quite a few. Not sure how long you would make four generations, but let's say 100 years.
There are the obvious famous families; Ford, Rockafellers, Du Pont, Mellon, Mars, Hearst, SC Johnson ("a family company"), etc. But there are a number of billionaire families that aren't recognized much outside of their "home towns" because they started mundane things like retail stores or own mineral rights.
That's not even getting into families whose wealth has diluted, but whose descendents are politicians, actors, or otherwise notable / influential people.
Granted, most billion dollar businesses are <4 generations old, but more sophisticated investment vehicles exists for preserving wealth than existed even 50 years ago.
Quite a few. Not sure how long you would make four generations, but let's say 100 years.
There are the obvious famous families; Ford, Rockafellers, Du Pont, Mellon, Mars, Hearst, SC Johnson ("a family company"), etc. But there are a number of billionaire families that aren't recognized much outside of their "home towns" because they started mundane things like retail stores or own mineral rights.
That's not even getting into families whose wealth has diluted, but whose descendents are politicians, actors, or otherwise notable / influential people.
Granted, most billion dollar businesses are <4 generations old, but more sophisticated investment vehicles exists for preserving wealth than existed even 50 years ago.
So at least on this list, https://www.forbes.com/forbes-400/, the vast majority do not have families that been on the list (or would have potentially been on the list if it existed 100 years ago) for 4 generations.
The list of billionaire families would be very different than the list of billionaire individuals. For example, there are currently 86 Ford heirs.
I went to a an expensive private school for college and there were a lot of old money students there. They didn’t all have the last name “Carnegie” or something else imminently recognizable, of course.
Plus, that money may get divided and spent over time, but it’s usually invested. It’s not like after 100 years it’s the same amount of money adjusted for inflation, if the next generations didn’t mismanage it.
Plus, that money may get divided and spent over time, but it’s usually invested. It’s not like after 100 years it’s the same amount of money adjusted for inflation, if the next generations didn’t mismanage it.
[deleted]
This is the kind of myopic reading of the law that will curtail entrepreneurial endeavors and lead to corporate-only wealth.
I fail to see how.
Entrepeneurs aren't going to not build a company because of some specific tax treatment that only applies whilst they are wildly successful.
Entrepeneurs aren't going to not build a company because of some specific tax treatment that only applies whilst they are wildly successful.
Taking away the money, though, will cripple their ability to grow the companies.
No SpaceX, no Tesla, no iPhone, etc.
No SpaceX, no Tesla, no iPhone, etc.
A tax on personal unrealized capital gains will not take away any money from the company. It's privately-held, and has no effect on a company's balance sheet.
> no effect on a company's balance sheet
Selling masses of stock to pay the tax will push the value of the stock down. That has a large effect on the company's ability to raise capital.
As for the entrepreneur, he'll have much less capital to invest.
It's a fantasy that one can extract endless billions from a company and its investors without consequences.
Selling masses of stock to pay the tax will push the value of the stock down. That has a large effect on the company's ability to raise capital.
As for the entrepreneur, he'll have much less capital to invest.
It's a fantasy that one can extract endless billions from a company and its investors without consequences.
I don't follow your reasoning, either. Do you really think that a new tax on several hundred billionaires will discourage the hundreds of thousands of entrepreneurs that are out there, that a significant amount of them will not bother since they can only make a few hundred million before they have an extra 15% of their money collected in taxes?
Most entrepreneurs would be overjoyed to be a billionaire and have to pay that extra 15%. Seems like they'd be the lucky ones. Seems like a billionaire or an aspiring billionaire complaining about such a thing would be pretty weird.
The parent you replied to mentioned wealth being locked up to avoid capital gains taxes. There are other pros and cons, I'm sure. Do you think this new tax on billionaires means that less people will be trying to become multi-millionaires?
Note that I'm not happy with the current tax system, and this seems like another kludge. I also don't know that we need to coddle or incentivize wealth maintenance, it's not an end in and of itself.
Most entrepreneurs would be overjoyed to be a billionaire and have to pay that extra 15%. Seems like they'd be the lucky ones. Seems like a billionaire or an aspiring billionaire complaining about such a thing would be pretty weird.
The parent you replied to mentioned wealth being locked up to avoid capital gains taxes. There are other pros and cons, I'm sure. Do you think this new tax on billionaires means that less people will be trying to become multi-millionaires?
Note that I'm not happy with the current tax system, and this seems like another kludge. I also don't know that we need to coddle or incentivize wealth maintenance, it's not an end in and of itself.
Extracting the money from them will mean less investment. It's simple mathematics. You take away a billion from an investor, then a billion is not invested.
Even worse, you're taking the money away from the most effective investors.
Even worse, you're taking the money away from the most effective investors.
Maybe that's the part I'm confused about. Aren't they talking about taxing unrealized capital gains, i.e. money that is being left locked up in a single stock, in order to avoid being taxed when it is moved? Wouldn't one of the effects of this tax be to incentive these effective/successful billionaires into moving their money into new investments, instead of being left parked in their already successful investment?
And most entrepreneurs are not, nor will never be, billionaires who are subject to this extra tax. That being the case I wouldn't think that this will put a dent in overall entrepreneurship. It might have the opposite effect, where there are numerically more entrepreneurs making capital allocation decisions, which might be better for society than having fewer people (billionaires) controlling an ever increasing amount of capital.
I grant that tax changes like this have numerous conflicting effects, sometimes unpredictable. Perhaps their will be another art bubble...
I don't think that it's a good thing that we structure our society for the convenience of those who can amass money. I'm definitely not fond of kludgy taxes like this one, but I also don't understand why so many jump to the defense of so few billionaires.
And most entrepreneurs are not, nor will never be, billionaires who are subject to this extra tax. That being the case I wouldn't think that this will put a dent in overall entrepreneurship. It might have the opposite effect, where there are numerically more entrepreneurs making capital allocation decisions, which might be better for society than having fewer people (billionaires) controlling an ever increasing amount of capital.
I grant that tax changes like this have numerous conflicting effects, sometimes unpredictable. Perhaps their will be another art bubble...
I don't think that it's a good thing that we structure our society for the convenience of those who can amass money. I'm definitely not fond of kludgy taxes like this one, but I also don't understand why so many jump to the defense of so few billionaires.
Exactly this. And even worse, you are disincentivizing the most effective leaders from driving their companies to huge success.
It eliminates the risk to established entities to be disrupted.
It eliminates the risk to established entities to be disrupted.
We’ll when musk started both those companies he wouldn’t be affected by this tax. In fact it wouldn’t have hit him until a few years ago and he hasn’t given either company money in longer than that.
And Steve jobs did t inject money into apple when they were creating the iPhone.
So you’re entire point has been pretty much invalidated
And Steve jobs did t inject money into apple when they were creating the iPhone.
So you’re entire point has been pretty much invalidated
Jobs put most of his fortune from Apple into developing Pixar, transforming it from a failure into a powerhouse.
The rest went into Next, which formed the core(!) of Apple's resurgence when Apple merged with it.
No Jobs money => no Pixar => no Next => no iPhone
Neener neener!
No Jobs money => no Pixar => no Next => no iPhone
Neener neener!
Musk currently has a controlling interest in Tesla because of his stock holdings. Under the proposal, he would no longer have the holdings, and thus no longer control the company.
> This facilitates wealth transfer from generation to generation
Well, arguably it's the step up in basis that enables generational transfer without taxation.
Well, arguably it's the step up in basis that enables generational transfer without taxation.
Generational wealth transfer is a good thing. It's the main reason most people work hard in life - to provide a better life for their offspring.
Wealth inequality is a good thing too. People who work harder necessarily live better lives. If you want to start stealing their hard work to give to the lazy, you're going to find that the hard-working flee the country à la the USSR.
Wealth inequality is a good thing too. People who work harder necessarily live better lives. If you want to start stealing their hard work to give to the lazy, you're going to find that the hard-working flee the country à la the USSR.
This comment is insulting and has no basis in fact.
There is no evidence that rich people work harder than poor people. In fact the opposite is far more likely to be true given the unique stresses of manual labour.
And there is no evidence that the driver of success is providing for their offspring. There are a whole range of factors at play.
There is no evidence that rich people work harder than poor people. In fact the opposite is far more likely to be true given the unique stresses of manual labour.
And there is no evidence that the driver of success is providing for their offspring. There are a whole range of factors at play.
You don't work harder than south east Asian ship breakers, who work 16 hour shifts in carsophaguses of asbestos and rust.
But you earn orders of magnitude more.
Income and wealth aren't solely functions of who worked the hardest and they never have been.
But you earn orders of magnitude more.
Income and wealth aren't solely functions of who worked the hardest and they never have been.
> There is no evidence that rich people work harder than poor people.
It's not about working hard, it's about working smart. I.e. leverage.
For example, my patio door kept getting stuck. I spend a lot of time with a file and chisel trying and failing to get it to fit properly. Finally, I bought a grinder for a few bucks from the pawn shop and had it fixed in a couple minutes, and it looked a lot better, too.
It's not about working hard, it's about working smart. I.e. leverage.
For example, my patio door kept getting stuck. I spend a lot of time with a file and chisel trying and failing to get it to fit properly. Finally, I bought a grinder for a few bucks from the pawn shop and had it fixed in a couple minutes, and it looked a lot better, too.
[deleted]
I think the primary issue is not precisely 'wealth inequality' but rather a lack of accountability and responsibility from people with large amounts of wealth. If one has assets whose value is representative of the life's work of several thousand people, it's one thing to have someone who is demonstrably capable and responsible manage it, and another thing entirely to have someone /own/ it. If I had to guess (and I clearly am) a larger proportion of people are upset with the latter than the former.
Nothing is stopping someone from employing their wealth to build a yacht, fifteen McMansions, and a thirty-foot solid-gold Mothman statue just after getting off of a six-month prison stint for a billion dollars of ecological damage (all purely hypothetical but I would assert entirely plausible); that people exist with the right to exchange a colossal amount of wealth to be allowed to waste an equally colossal amount of actual effort and resources is the problem.
I won't say nobody has an issue with individual people being allowed to direct huge amounts of funding, but I would assert that more people recognize that extravagant waste for the purpose of status should not be scaled to the extant degree of wealth disparity.
Nothing is stopping someone from employing their wealth to build a yacht, fifteen McMansions, and a thirty-foot solid-gold Mothman statue just after getting off of a six-month prison stint for a billion dollars of ecological damage (all purely hypothetical but I would assert entirely plausible); that people exist with the right to exchange a colossal amount of wealth to be allowed to waste an equally colossal amount of actual effort and resources is the problem.
I won't say nobody has an issue with individual people being allowed to direct huge amounts of funding, but I would assert that more people recognize that extravagant waste for the purpose of status should not be scaled to the extant degree of wealth disparity.
If you own your house, is it unfair that you don't share it with all the people who contributed to building it? Or is it fair that you paid them what they asked for their efforts?
This is not really the point that I'm arguing--my point would be that if you wanted your house entirely encrusted in precious jewels, each of which was individually polished by a team of people paid 50 USD an hour to do this weekly, nothing stops you from making that decision even though you are monopolizing a large quantity of resources for status, almost entirely. Someone with a large amount of wealth is generally within their rights to do this, which I would view as a problem.
This isn't to say that I would accuse the majority (or even very many) individuals in positions where they're able to leverage a lot of wealth of anything specifically this egregious, but rather that because they're able to control many resources because their efforts have enormous leverage (and therefore are worth more to the system they operate in), they can consume orders of magnitude more resources to gain comparably minuscule increases in personal utility.
In addition, because of how valuable their leverage makes their effort, when they cause damage whose negative value is on the scale of individuals, the disparity leads a system that's self-interested to forgive them much more quickly--if someone can get 1% more value out of 10 billion dollars' resources than anyone else, that system doesn't have any purely value-driven reason to replace them in their position if they should murder someone and its negative effects never amount to more than a couple million dollars' loss in value. From any ethical standpoint that holds "death at the whims of billionaires" incompatible with "certain unalienable rights", this is a problem.
This isn't to say that I would accuse the majority (or even very many) individuals in positions where they're able to leverage a lot of wealth of anything specifically this egregious, but rather that because they're able to control many resources because their efforts have enormous leverage (and therefore are worth more to the system they operate in), they can consume orders of magnitude more resources to gain comparably minuscule increases in personal utility.
In addition, because of how valuable their leverage makes their effort, when they cause damage whose negative value is on the scale of individuals, the disparity leads a system that's self-interested to forgive them much more quickly--if someone can get 1% more value out of 10 billion dollars' resources than anyone else, that system doesn't have any purely value-driven reason to replace them in their position if they should murder someone and its negative effects never amount to more than a couple million dollars' loss in value. From any ethical standpoint that holds "death at the whims of billionaires" incompatible with "certain unalienable rights", this is a problem.
There's been a surge in real estate values lately. I've yet to see any homeowner decide they owe part of that gain to the people who built the house or the folks who mow their lawns.
I'm... confused as to what your interpretation of my comments here is. I'm explicitly stating that the issue isn't about people deciding they owe something to other people, or what the market decides the value of something is--it is about people in highly-leveraged positions who are currently able to waste resources or actively cause damage with some impunity because of the value their leverage allows them to provide.
I'm not making the suggestion that those who are wealthy should divest themselves of their wealth and donate it to charity, the point I'm intending to communicate is that such leverage shouldn't act as a pass to engage in unethical behavior.
I'm not making the suggestion that those who are wealthy should divest themselves of their wealth and donate it to charity, the point I'm intending to communicate is that such leverage shouldn't act as a pass to engage in unethical behavior.
I simply disagree that an economic incentive is necessary or useful for people with extreme wealth. Already rich people who are primarily motivated by the accumulation of wealth are unlikely to have some unique skill that society needs in our active labour force. If our tax structure made them more likely to retire early, our workforce would not be starved of useful skill.
Genuinely smart people with genuinely valuable skill (like Musk or Jobs) would work equally hard whether their offspring were set to inherit 10 million or 10 billion dollars.
Genuinely smart people with genuinely valuable skill (like Musk or Jobs) would work equally hard whether their offspring were set to inherit 10 million or 10 billion dollars.
> People who work harder necessarily live better lives
The words "CITATION NEEDED"— in bold 72 point-font flashing letters—spring to mind.
Do you have any data, or other evidence, to back that claim up?
The words "CITATION NEEDED"— in bold 72 point-font flashing letters—spring to mind.
Do you have any data, or other evidence, to back that claim up?
> It's the main reason most people work hard in life - to provide a better life for their offspring.
Do you believe people without children have no motivation to work hard?
Do you believe people without children have no motivation to work hard?
You mean old middle class, and poor homeowners, can stay in the house they raised a family in?
The only reason my high school educated 80 years old mother in declining health can stay in a home, and county, she feels somewhat safe is because of prop 13.
Her biannual property taxes are still a big deal when they arrive.
I've said this before, but I'm beginning to think if you didn't live through the craziness before Prop 13, you won't ever quite get it.
Prop 13 has been the only blessing most homeowners have been given.
If you want to put income limits on the gift of prop 13 fine, but doing away with it completely would be evil. By income limits I mean the guy making $600,000/year, and a huge bank account, could probally still survive without prop 13 protection.
The 80 year old lady, or man, surviving on 1/2 widower's blue collar pension is another story.
(I'm for means testing on all programs. I'm also for tieing all societal fees/fines---speeding tickets, registration, patent fees, etc. to 1040 income/assets wealth.)
The only reason my high school educated 80 years old mother in declining health can stay in a home, and county, she feels somewhat safe is because of prop 13.
Her biannual property taxes are still a big deal when they arrive.
I've said this before, but I'm beginning to think if you didn't live through the craziness before Prop 13, you won't ever quite get it.
Prop 13 has been the only blessing most homeowners have been given.
If you want to put income limits on the gift of prop 13 fine, but doing away with it completely would be evil. By income limits I mean the guy making $600,000/year, and a huge bank account, could probally still survive without prop 13 protection.
The 80 year old lady, or man, surviving on 1/2 widower's blue collar pension is another story.
(I'm for means testing on all programs. I'm also for tieing all societal fees/fines---speeding tickets, registration, patent fees, etc. to 1040 income/assets wealth.)
What seems odd to me (if I understand it correctly) is that prop 13 keeps your property tax low, but you still get the full benefit of the appreciation in price when you sell the property. It kind of seems like if it's artificially keeping the tax low, the full tax bill should come due at some point, which would logically be at the change of ownership.
Property tax is the recurring value tax, kind of a wealth tax while you hold a property, and prop 13 does shield much of the appreciated value from this. A new homeowner might be paying 1-2% of market price per year, while an elderly neighbor might pay 1-2% of an assessed value that is closer to a market value from 20+ years ago. The assessment does increase at a very slow rate, and in larger jumps with remodeling or other improvements.
At the sale, the appreciation becomes realized as capital gains income. There are some rules making a portion of gains tax-exempt for a typical homeowner, but the remainder of a large appreciation is taxed as income. There can also be a sales/transfer tax on the transaction, which is of a comparable rate to the annual property tax rate.
The third significant event is inheritance, where the house could pass to an heir without a sale and have its basis updated to current value. This is when the appreciated gains can really go untaxed.
At the sale, the appreciation becomes realized as capital gains income. There are some rules making a portion of gains tax-exempt for a typical homeowner, but the remainder of a large appreciation is taxed as income. There can also be a sales/transfer tax on the transaction, which is of a comparable rate to the annual property tax rate.
The third significant event is inheritance, where the house could pass to an heir without a sale and have its basis updated to current value. This is when the appreciated gains can really go untaxed.
You can have carveouts for your 80 year old grandmother without freezing property taxes for everyone.
Prop 13 disincentivizes building housing.
Stop calling people evil just because your grandmother isn't the center of their policy concerns.
Stop calling people evil just because your grandmother isn't the center of their policy concerns.
> Prop 13 disincentivizes building housing.
I didn't think we reached the point where people are arguing that things that make housing more valuable disincentivize building more homes - but here we are.
It is zoning restrictions, EIR, etc., that disincentivize housing.
I didn't think we reached the point where people are arguing that things that make housing more valuable disincentivize building more homes - but here we are.
It is zoning restrictions, EIR, etc., that disincentivize housing.
Prop 13 absolutely disincentivizes building housing. Other policies can also be bad. But grandma's house isn't being bulldozed to make way for a quadplex because she's insulated from the market.
https://www.kqed.org/news/11700683/too-few-homes-is-proposit...
But if you own a home in California, you are incentivized to maintain prop 13.
It's funny how hard it is for people to understand something when it cuts against their personal interests.
https://www.kqed.org/news/11700683/too-few-homes-is-proposit...
But if you own a home in California, you are incentivized to maintain prop 13.
It's funny how hard it is for people to understand something when it cuts against their personal interests.
Your mother could easily pay higher property taxes with a home equity line of credit. She probably should also be using that HELOC to fund a more comfortable lifestyle -- she probably needs that money more than her heirs do. (I'm assuming, given that you're posting on HN).
This proposal seemed utterly reasonable to me, especially this:
> US budget deficits don’t require a radical confiscation scheme like this. We already have a very effective progressive tax system which applies the same rules - but different rates - to everyone. If tax revenue is too low, just raise the top tax brackets
That, together with closing the step-up-in-basis loophole, are the simplest ways to more equitably raise revenue.
> US budget deficits don’t require a radical confiscation scheme like this. We already have a very effective progressive tax system which applies the same rules - but different rates - to everyone. If tax revenue is too low, just raise the top tax brackets
That, together with closing the step-up-in-basis loophole, are the simplest ways to more equitably raise revenue.
The issue is that many billionaires effectively have zero revenue. For example, Elon's salary at Tesla is 0$ per year. So you can increase the top bracket all you want, they won't pay more.
Instead they get liquidity through loans backed by their shares, on which they of course have no tax.
I agree that taxing based on unrealised gains is not a good solution, but I don't see how raising the top bracket solves that either.
Instead they get liquidity through loans backed by their shares, on which they of course have no tax.
I agree that taxing based on unrealised gains is not a good solution, but I don't see how raising the top bracket solves that either.
People keep using this example, but it doesn't really make sense. If you take out a loan against the value of your increased shares, then you still have to pay that loan back eventually, and when you do, you have to pay tax on whatever you liquidate to get the funds to pay back the loan (in addition to paying interest on the loans). This is literally how all loans work.
The one loophole here is that if you don't pay your loans back until you die, then your heirs have to pay back the loan. But there is a special "step up in basis" provision where your heirs wouldn't have to pay capital gains tax on the rise in the value of your shares (but you would). Close that loophole and then you'd have a fair system.
The one loophole here is that if you don't pay your loans back until you die, then your heirs have to pay back the loan. But there is a special "step up in basis" provision where your heirs wouldn't have to pay capital gains tax on the rise in the value of your shares (but you would). Close that loophole and then you'd have a fair system.
As I understand, though, the USA CGT rate is basically half the income tax rate, so even if they eventually pay tax on disposal to meet the loan repayments (which they don't, at least not on a 100% basis), they still pay only half the effective tax rate.
Even if heirs do have to pay tax eventually, do we really want to wait 40+ years to collect taxes on wealth that is being generated using today's resources? If I recall correctly, Elon has been rolling over his personal loans for a while now, in excess of a billion dollars. At this point, these are basically untaxed stock sales.
Then tax the loans?
I'm actually in favor of this.
I've long held that there should be public liquidity in all companies over a certain valuation and the company should not be allowed to bar you from selling the stock (though it could retain right to beat any pending offers)
It's asinine that companies are allowed to treat equity pay as pay, and IRS can tax it as realized (AMT), but the worker does not in fact have any instrument with which to pay the bill.
Edit: Also this is a really smart tweet IMO
The valuation would grow slower due to burn rate, but the ownership % would not change.
I've long held that there should be public liquidity in all companies over a certain valuation and the company should not be allowed to bar you from selling the stock (though it could retain right to beat any pending offers)
It's asinine that companies are allowed to treat equity pay as pay, and IRS can tax it as realized (AMT), but the worker does not in fact have any instrument with which to pay the bill.
Edit: Also this is a really smart tweet IMO
Give yourself a salary that pays for your wealth tax obligations. You don't have to sell anything.
The valuation would grow slower due to burn rate, but the ownership % would not change.
Somehow I think Elon giving himself a multi-billion dollar salary to cover a jump in Tesla stock would upset a lot of people.
I'd be in favor of this I think. It might force Elon, Tesla, or the shareholders to address the elephant in the room: Teslas market cap vs their revenue.
Teslas market cap is 1030m on 31.5m of revenue. GM is 79m on revenue of 122.5m. That's 50x the market cap per revenue.
Teslas market cap is 1030m on 31.5m of revenue. GM is 79m on revenue of 122.5m. That's 50x the market cap per revenue.
If a company is doing tons of R&D, and everything suggests that that R&D will give huge dividends in the future, then it seems perfectly normal for such a company to have a high market-cap/revenue ratio.
If having too big of a market cap relative to revenue is wrong, then you're basically saying that companies should not invest too much in their future, just use their money to sell as much as possible right now.
You know who else has extremely high ratios of mktcap/revenue? Pharmaceutical companies trying to cure diseases that have no available cure. Is it wrong to try to cure those diseases?
If having too big of a market cap relative to revenue is wrong, then you're basically saying that companies should not invest too much in their future, just use their money to sell as much as possible right now.
You know who else has extremely high ratios of mktcap/revenue? Pharmaceutical companies trying to cure diseases that have no available cure. Is it wrong to try to cure those diseases?
I think Tesla does a good job of making folks think they are doing a lot of R&D, but that's about it. Based on some quick internet research, Tesla is a quarter of the R&D of either Ford or GM...
Unless you think it's higher quality or in a different area... but the whole world is going toward electric cars and autonomous driving. Tesla AutoPilot comes in a distant second to GM according to Consumer Reports: https://www.cnbc.com/2020/10/28/gms-super-cruise-tops-teslas...
Tesla build quality also ranks low, even according to Elon: https://www.cnn.com/2021/02/03/business/elon-musk-tesla-qual...
Unless you think it's higher quality or in a different area... but the whole world is going toward electric cars and autonomous driving. Tesla AutoPilot comes in a distant second to GM according to Consumer Reports: https://www.cnbc.com/2020/10/28/gms-super-cruise-tops-teslas...
Tesla build quality also ranks low, even according to Elon: https://www.cnn.com/2021/02/03/business/elon-musk-tesla-qual...
There's a reasonable chance of Tesla creating patents that generate a license fee from every car produced, basically in the globe.
It's kind of the reason Toyota has a monopoly on hybrids: they have a patent on the best kind of hybrid system. Ford held a similar enough patent that Toyota entered into a license agreement with them.
Getting a 20 year monopoly on key EV/battery tech will be worth an unimaginable sum.
I don't agree with Telsa's valuation, but I can appreciate why investors support them at their current price.
It's kind of the reason Toyota has a monopoly on hybrids: they have a patent on the best kind of hybrid system. Ford held a similar enough patent that Toyota entered into a license agreement with them.
Getting a 20 year monopoly on key EV/battery tech will be worth an unimaginable sum.
I don't agree with Telsa's valuation, but I can appreciate why investors support them at their current price.
If it's so perfectly reasonable, they should be able to take out cheap loans to pay this new Elon salary.
Revenue is an instantaneous metric of a company where as Market Value is a reflection of sentiment integrated over time and relatively compared to competing options for capital (such as other stocks, bonds, even present vs future purchases if inflation is material).
They will always be quite disjoint when viewed with an single/small number of revenue data points.
They will always be quite disjoint when viewed with an single/small number of revenue data points.
How exactly would you propose Tesla address it? Put out a press release that says "you people are paying too much for our stock, stop it"?
How would they “address” that? It’s outside of their control
I think what most people want is for billionaires to pay their true rate of income instead of artificially low percentages because they have access to financial instruments that most don't.
Would SpaceX even exist if this law had been in place? Serious question. Let's think this through.
Also what if it had been in place during the dotcom boom and bust?
Also what if it had been in place during the dotcom boom and bust?
jesus christ, yes. Elon didn't become a billionaire including assets until 2012, well after nasa awarded them the cargo contract and two years after Falcon 9 started launching. Before that, he was barely a millionaire after PayPal and his investments in Tesla and SpaceX. This tax wouldn't have affected him at all until both SpaceX and Tesla were relatively healthy with both Falcon 9 and Model S.
There's a reason CEO's at this level take $1 in salary.
There's a reason CEO's at this level take $1 in salary.
He could also himself shares with super-voting power, like what Facebook and Google have done.
Companies don’t do this anymore because S&P and other index creators will refuse to add your company to their indexes if you have multiple share classes. It’s much better to be part of an index than to retain founder control, for shareholders.
https://www.ft.com/content/993e4c11-8729-3168-a280-69e1d400b...
https://www.ft.com/content/993e4c11-8729-3168-a280-69e1d400b...
Plenty of IPOs this year had dual class shares (~20% I believe). Founders are often billionaires; money is now measured in log terms, but control is a boolean.
If they already have control, they'll want to keep that control.
Investors (VC, etc) have made 20x or more on their investment already and no one is going to go on a fight with successful founders, for a variety of reasons but primarily, they don't care how a company performs in the long run because their fund has already sold their stake and closed already.
If they already have control, they'll want to keep that control.
Investors (VC, etc) have made 20x or more on their investment already and no one is going to go on a fight with successful founders, for a variety of reasons but primarily, they don't care how a company performs in the long run because their fund has already sold their stake and closed already.
The price boost from being added to the S&P is temporary and small (~5%) https://www.investopedia.com/terms/s/spphenomenon.asp
The person controlling the company potentially has a much greater and longer lasting influence on the stock price!
Epic isn't going to be part of the S&P when it's private anyway, so obviously that's not a top concern for Sweeney.
The person controlling the company potentially has a much greater and longer lasting influence on the stock price!
Epic isn't going to be part of the S&P when it's private anyway, so obviously that's not a top concern for Sweeney.
Is it possible to do that after taking outside investment? I always assumed share classes like that had to be set up at the beginning.
Almost everything is possible you manage to get the other shareholders to agree. That might happen when some early investors sometimes want the founder to have more control especially before going public. The theory is that you'd rather have a founder you invested on in the first place steering the company than let your generic wallstreet shareholder without a vision(tm) take over a unicorn still full of promise.
Sometimes the bet pays off, very very well. Take for example Musk. You can say whatever about him, but it's extremely clear he has a vision, and does pretty much anything to get there. I'm not sure tesla or spacex would've survived 2018 with someone else at the helm or if a shareholder revolt happened. Just by that metric he is already worth dozens of billions to the rest of the shareholders.
Zuck is also a good example of investors trading off votes for a more wall st. independant, steadier long term eadership.
Now keep in mind those are exceptions. Having supervoting shares orbmultiple classes of shareholders is very often not a good thing and usually leads to less value being generated.
Accountability to shareholders is usually good and very important to ensure sane corporate governance. Which is why CEOs and founders absolutely love having ever less powerful shareholders and we end up in situations like now where even the crappiest IPO has absurdly overgeared supervoting classes. Who doesn't want to buy in a deeply in debt, cash burning ipo with very questionable growth who's founder has a perpetual 80% of the votes?
Sometimes the bet pays off, very very well. Take for example Musk. You can say whatever about him, but it's extremely clear he has a vision, and does pretty much anything to get there. I'm not sure tesla or spacex would've survived 2018 with someone else at the helm or if a shareholder revolt happened. Just by that metric he is already worth dozens of billions to the rest of the shareholders.
Zuck is also a good example of investors trading off votes for a more wall st. independant, steadier long term eadership.
Now keep in mind those are exceptions. Having supervoting shares orbmultiple classes of shareholders is very often not a good thing and usually leads to less value being generated.
Accountability to shareholders is usually good and very important to ensure sane corporate governance. Which is why CEOs and founders absolutely love having ever less powerful shareholders and we end up in situations like now where even the crappiest IPO has absurdly overgeared supervoting classes. Who doesn't want to buy in a deeply in debt, cash burning ipo with very questionable growth who's founder has a perpetual 80% of the votes?
Yes, it's possible: Google, for instance, did it not only after taking outside investment, but after it went public (in 2014, 10 years after it went public) https://www.investopedia.com/ask/answers/052615/whats-differ...
I think it is a smart way to handle it and it would work for some CEO/founders however, some founders operate as board members that still influence much of the direction and operation without the same possibilities for pay rate increases to cover the gains. I think this could work under specific ownership scenarios but, for high p/e ratio companies this will likely requires ownership sales.
It would likely increase pressure for stocks to pay dividends at a rate that covers taxes on the gains. Which would probably be a good thing.
That's ridiculous. Tesla's market value gain since it went public is around $1T. The aggregate profits since then are at most a couple billion and may even be a loss. Paying out a salary to cover the gains is impossible.
Why do you think this requires public liquidity?
I assume you’ve never founded a successful company
This comment adds absolutely nothing to the discussion.
Is there some specific critique you have of what OP has said ?
Is there some specific critique you have of what OP has said ?
It’s like saying “I think all music rock stars could improve their music by doing X.”
That statement could be interesting if you’re a rockstar. If not, then not so much.
That statement could be interesting if you’re a rockstar. If not, then not so much.
That doesn't make any sense -- something that applies to "all music rock stars" would have to come from a mastering engineer or someone at that level and even then it wouldn't be universally applicable.
few have at the relevant magnitude
It will also add very odd incentive to not grow your company after you reach the billionaire tax-level.
A. you'll maintain ownership
B. you wont have to pay taxes on the gains
Tons lot of founders care about 'A' a lot more than is "rational".
It sounds okay, but the USA will miss out on a lot of potential wealth and tax revenue from people who choose not to grow their companies into huge multinational corporations.
A. you'll maintain ownership
B. you wont have to pay taxes on the gains
Tons lot of founders care about 'A' a lot more than is "rational".
It sounds okay, but the USA will miss out on a lot of potential wealth and tax revenue from people who choose not to grow their companies into huge multinational corporations.
Smaller companies may be a net benefit over the long term. These super large companies tend to become over dominant in their markets and and start engaging in anti-competetive behaviours.
> These super large companies tend to become over dominant in their markets and and start engaging in anti-competetive behaviours.
This complaint I've heard my entire life about the dominant companies of the day that have since collapsed of their own accord. Companies like RCA, IBM, Sears, Kodak, etc.
10 biggest companies by market cap 20 years ago:
GE Cisco Exxon Phizer Microsoft Walmart Citigroup Vodafone Intel Royal Dutch Shell
and today:
Apple Microsoft Alphabet Amazon Facebook Tesla Berkshire Hathaway TSMC Tencent Nvidia
This complaint I've heard my entire life about the dominant companies of the day that have since collapsed of their own accord. Companies like RCA, IBM, Sears, Kodak, etc.
10 biggest companies by market cap 20 years ago:
GE Cisco Exxon Phizer Microsoft Walmart Citigroup Vodafone Intel Royal Dutch Shell
and today:
Apple Microsoft Alphabet Amazon Facebook Tesla Berkshire Hathaway TSMC Tencent Nvidia
The fact that giant companies eventually collapse under the weight of their own greed and complacency doesn’t mean they don’t engage in anticompetitive behavior while they’re at the top.
It means they were not successful at crushing their competitors.
My point is huge companies can engage can have negative effects on competition even if they eventually fall.
How many businesses has Amazon whipped out in the retail space by leaning on the profits from the cloud division?
Just the other day we saw documents from the DOJ’s lawsuit against Google for anticompetitive behavior. In the those documents we saw internal communication about a desire for Google to use their dominance in the browser space to create the web into a walled garden [0].
[0] https://news.ycombinator.com/item?id=28974798
How many businesses has Amazon whipped out in the retail space by leaning on the profits from the cloud division?
Just the other day we saw documents from the DOJ’s lawsuit against Google for anticompetitive behavior. In the those documents we saw internal communication about a desire for Google to use their dominance in the browser space to create the web into a walled garden [0].
[0] https://news.ycombinator.com/item?id=28974798
Literally any functioning company has negative effects on its competition.
Google turning the web into a walled garden will simply create opportunity for others.
Google turning the web into a walled garden will simply create opportunity for others.
Those largest companies from 20 years ago didn't fail, they are all doing very well (well, GE excepted), they just did not grow nearly as fast as new tech did.
They were bad investments over that time period. I'm still smarting over my disastrous Cisco investment.
How's Intel doing lately? Nvidia ate their ice cream.
Cisco and Intel could do no wrong prior to 2000.
How's Intel doing lately? Nvidia ate their ice cream.
Cisco and Intel could do no wrong prior to 2000.
I'd expect that we'd just see more large companies overseas, and fewer in America.
If the government succeeds in breaking up America's huge companies, the US's economic advantage will be ceded to other countries.
All the FAANG companies are American. What country wouldn't like to have just one of them?
All the FAANG companies are American. What country wouldn't like to have just one of them?
Decades of economic research has consistently confirmed that large corporations have substantially higher productivity and efficiency.
Big businesses are the engines the drive the economy. Small businesses are the future big businesses.
A healthy economy needs both.
After Japan was burned to the ground in WW2, the US sent in academics to structure the economic recovery. They thought big business was bad, and only allowed small companies to operate. The economy flatlined.
Finally, they allowed big business to resume operations. The economy went straight up until 1990 or so when it became moribund for other reasons.
A healthy economy needs both.
After Japan was burned to the ground in WW2, the US sent in academics to structure the economic recovery. They thought big business was bad, and only allowed small companies to operate. The economy flatlined.
Finally, they allowed big business to resume operations. The economy went straight up until 1990 or so when it became moribund for other reasons.
I think the law is bad policy, but you can get around this stuff with things like Class F shares: https://thebusinessprofessor.com/en_US/business-governance/c...
If you own solely class F shares you'll need to liquidate your class F shares to pay this tax.
If you're lucky you'll have enough common stock to sell off. But eventually you'll run out.
If you're lucky you'll have enough common stock to sell off. But eventually you'll run out.
They can be structured so that the still retain (nearly) total control (I personally think this is a good thing).
See: https://techcrunch.com/2020/08/21/palantir-three-class-votin...
"Palantir wants to push the envelope further though with a three-class structure that would prioritize Thiel, Karp, and Cohen above all others. In Palantir’s model, there would be a Class A share with 1 vote, a Class B share with 10 votes, and a special “Class F” share with variable votes.
Class F shares would share 49.999999% (six 9s in the decimal – I counted twice) of the voting power of Palantir at all times, regardless of the underlying ownership of shares. Important to note that that is not a “majority” and thus they will not have literally a controlling stake in the public company."
See: https://techcrunch.com/2020/08/21/palantir-three-class-votin...
"Palantir wants to push the envelope further though with a three-class structure that would prioritize Thiel, Karp, and Cohen above all others. In Palantir’s model, there would be a Class A share with 1 vote, a Class B share with 10 votes, and a special “Class F” share with variable votes.
Class F shares would share 49.999999% (six 9s in the decimal – I counted twice) of the voting power of Palantir at all times, regardless of the underlying ownership of shares. Important to note that that is not a “majority” and thus they will not have literally a controlling stake in the public company."
It is hard to overstate the harm this will do to entrepreneurial enterprise as a result of these anti-growth incentives.
If the rate is too high, I suspect wealth will be transferred to assets like real estate with lower annual taxations. And this will lead to a new class of speculation. Or rearranging deck chairs on the Titanic because we haven't solved the fundamental problem that there are just too many bespoke deductions for the rich.
You know, one of the worst things about Atlas Shrugged is the degree to which its villains are cartoonish strawmen, doing things like... passing tax bills that end founder control of independent companies.
the reasonable thing, would be to tax loans underwritten by securities as income. that loophole, of borrowing on stocks you own is pretty much giving a bazooka to sycophants or crooks who are prone to abusing it. look at adam neuman for example. otherwise, this so called bill is gonna punish the people it didn't intend to punish, while leaving the current beneficiaries of low wealth tax unharmed.
If the gains are theoretical, wouldn't it make sense to make the tax theoretical too?
There's some truth to it ... but why is that a bad thing exactly?
How important are Bezos, Musk, Page, Brin and Zuckerberg to society?
It’s hard to fathom FB, Amazon, Tesla and SpaceX becoming the behemoths they are without a dictatorish stock holder with absolute control. Amongst those, certainly Musks’ contribution from an electric car and space exploration standpoint are societally argueably positive. Tesla and SpaceX simply would not have happened without him.
It’s hard to fathom FB, Amazon, Tesla and SpaceX becoming the behemoths they are without a dictatorish stock holder with absolute control. Amongst those, certainly Musks’ contribution from an electric car and space exploration standpoint are societally argueably positive. Tesla and SpaceX simply would not have happened without him.
You say they wouldn’t be behemoths like that’s a bad thing. There’s weekly threads on HN about Amazon, Google and FB abusing their position on the market.
The specific people mentioned are certainly nowhere near as important to society as their wealth makes it appear.
Can you honestly point to Bezos and say he is "worth" 196,100,000 times more to society than the Amazon warehouse worker who has $1000 in the bank?
Did he put in 190 million man hours more than the Warehouse worker?
Did he have ideas that were 190 million times better? What kind of IQ would you need to pull that off?
It a matter of good ideas, some long hours no doubt, right time, right place and leverage the work of many thousands of others.
Smart work, but not worth 190 million times his lowest paid.
This level of wealth inequality is indicative of a broken system.
Can you honestly point to Bezos and say he is "worth" 196,100,000 times more to society than the Amazon warehouse worker who has $1000 in the bank?
Did he put in 190 million man hours more than the Warehouse worker?
Did he have ideas that were 190 million times better? What kind of IQ would you need to pull that off?
It a matter of good ideas, some long hours no doubt, right time, right place and leverage the work of many thousands of others.
Smart work, but not worth 190 million times his lowest paid.
This level of wealth inequality is indicative of a broken system.
> The specific people mentioned are certainly nowhere near as important to society as their wealth makes it appear
No one knows how much someone is "worth to society". Not me, and not you. Not even Bezos. This is not even a well-defined question.
But what we do know is that this is not what money measures, and attempts to politicize that -- to create some algorithm that decides what someone is worth to society, and then pay them according to that algorithm, always lead to terrible outcomes.
In the same way, we don't know how good or evil Bezos is, and neither is money a measure of good points net evil points.
The sooner we abandon these weird discourses around money, trying to endow it as some kind of metaphysical tally, or make it conform to some metaphysical tally, the better.
No one knows how much someone is "worth to society". Not me, and not you. Not even Bezos. This is not even a well-defined question.
But what we do know is that this is not what money measures, and attempts to politicize that -- to create some algorithm that decides what someone is worth to society, and then pay them according to that algorithm, always lead to terrible outcomes.
In the same way, we don't know how good or evil Bezos is, and neither is money a measure of good points net evil points.
The sooner we abandon these weird discourses around money, trying to endow it as some kind of metaphysical tally, or make it conform to some metaphysical tally, the better.
I like your comment. Discrete "worth to society" is indeed a vague and nebulous idea.
And money doesn't measure that, nor serve as a cosmic measure of morality.
If you remove wealth as being an indicator of worth to society, then Bezos has one less reason for such wealth.
The only reason he has the money is that he played the game well. But society makes the rules of the game and I think they should change.
And money doesn't measure that, nor serve as a cosmic measure of morality.
If you remove wealth as being an indicator of worth to society, then Bezos has one less reason for such wealth.
The only reason he has the money is that he played the game well. But society makes the rules of the game and I think they should change.
if you start a company you should be able to continue to own that company until you decide you're ready to sell it
Then the company can pay out salary for him to pay those taxes. Then he can continue to be owner without selling shares.
Changes in law often result in changes to how companies operate, they're not forced to stick with status quo.
Changes in law often result in changes to how companies operate, they're not forced to stick with status quo.
Most of these billionaires are founders of companies that were worth many billions of dollars before they ever turned a profit. There is no option just to pay out the cash to cover the gains tax.
I don't really see a problem. There would just be a new equilibrium. Pay salary->increased burn->lower valuation. The valuations are mostly detached from reality currently, it would bring it more in line.
There are no mom and pop store billionaires.
And the Income Tax originally was only 3% and only applied to less than 1% of the population.
The idea that it would apply to everyone, and be 20% was literally laughed out of the debate on implementing a national income tax as a "crazy conspiracy", it took less than 50 years before that crazy conspiracy was reality.
There is little reason to believe history will not play out the same, and it will not be long before this expands beyond the evil billionaires you despise soo much to those mom and pop stores you seem to claim love for...
The idea that it would apply to everyone, and be 20% was literally laughed out of the debate on implementing a national income tax as a "crazy conspiracy", it took less than 50 years before that crazy conspiracy was reality.
There is little reason to believe history will not play out the same, and it will not be long before this expands beyond the evil billionaires you despise soo much to those mom and pop stores you seem to claim love for...
But don't forget: the slippery slope argument is a logical fallacy!!!11!
I'm not sure what you mean by this, but Walmart started as a mom and pop store, and the Walton family maintains majority ownership to this day.
Walmart didn't go from mom and pop store to national corporation without an IPO.
I'm going by wiki data here, which says they had 18 stores and annual revenue of 9 million in 1968. If they had stayed private they were probably clearing a million dollars a year, give or take. To get from there to billions they had to raise outside money, specifically by selling stock and debt to someone else. That is by definition "not owning it anymore" because they're selling (some of) it to raise funding.
Like I said, there are no mom and pop billionaires. To get from millionaire to billionaire requires outside money. And yes, that includes tech companies. I know tech founders like to write false hagiographies for themselves after the fact about starting XYZ in a garage, but dig far enough and you usually find it was more like "garage + 25 million from Sequoia Capital," like Google.
I'm going by wiki data here, which says they had 18 stores and annual revenue of 9 million in 1968. If they had stayed private they were probably clearing a million dollars a year, give or take. To get from there to billions they had to raise outside money, specifically by selling stock and debt to someone else. That is by definition "not owning it anymore" because they're selling (some of) it to raise funding.
Like I said, there are no mom and pop billionaires. To get from millionaire to billionaire requires outside money. And yes, that includes tech companies. I know tech founders like to write false hagiographies for themselves after the fact about starting XYZ in a garage, but dig far enough and you usually find it was more like "garage + 25 million from Sequoia Capital," like Google.
Koch industries does over $100B in revenue and has never gone public.
Bloomberg is another example.
Bloomberg is another example.
Yes, but Walmart is no longer a mom and pop shop.
It's a principle that we should apply evenly. I also find it hard to believe that this won't grow in scope once implemented.
Sam Walton says, "Huh?"
because taxes should be paid on money that exist and can spent.
you wanna take a loan against your stock? you pay taxes on that loan.
you wanna sell your stock? you pay taxes on the stock you sell.
you just get your salary from the company and never sell stock? you pay taxes on your salary, and not on stock that are doing nothing.
you wanna take a loan against your stock? you pay taxes on that loan.
you wanna sell your stock? you pay taxes on the stock you sell.
you just get your salary from the company and never sell stock? you pay taxes on your salary, and not on stock that are doing nothing.
you wanna take a loan against your stock? you pay taxes on that loan.
That’s exactly the problem —- loans aren’t income, they’re debt, and debt isn’t taxed. Worse yet, the ultra-elite can carry out “buy (or ‘found’), borrow, die” strategies that let them pass the debt onto their kids, who can sell the securities at a tax advantage due to the stepped-up basis loophole.
That’s exactly the problem —- loans aren’t income, they’re debt, and debt isn’t taxed. Worse yet, the ultra-elite can carry out “buy (or ‘found’), borrow, die” strategies that let them pass the debt onto their kids, who can sell the securities at a tax advantage due to the stepped-up basis loophole.
but this is the kind of loophole that should be closed.
but they aren't.
and now we wonder why some "loopholes" are closed and some are not.
but they aren't.
and now we wonder why some "loopholes" are closed and some are not.
I am still trying to go through everything proposed and well I don't see a final draft somewhere -given that a lot of sub clauses, that are tax critical, seems to be flying around:
I agree with Tim's tweet and the article: not sure it will actually bring more money. It might bring much less.
Essentially the fundamental assertion this breaks is that the stock market is going to stay the same. This might be a great tool now for predicting stock upper value: you are the majority owner and have to decide if you are going to do a buyback or liquidate corporate stock. If your paper value is close to a billion of money you will never see but will pay taxes to, I think you have a strong incentive to keep control of your company and screw the rest of your investors, who would love a buyback as that is the tax effective way of making money of stock right now. Maybe dividends will do a comeback? Regardless, I would be surprised if some stock -- say tesla -- remain high.
So a lot of small investors / average Joe get to declare tax losses so that a big fish that has greater control on the stock price might declare wins???
I am missing some clause I guess. I am not touching IPO implications as that is anothwr minefield and a lot of other threads are discussing it
I agree with Tim's tweet and the article: not sure it will actually bring more money. It might bring much less.
Essentially the fundamental assertion this breaks is that the stock market is going to stay the same. This might be a great tool now for predicting stock upper value: you are the majority owner and have to decide if you are going to do a buyback or liquidate corporate stock. If your paper value is close to a billion of money you will never see but will pay taxes to, I think you have a strong incentive to keep control of your company and screw the rest of your investors, who would love a buyback as that is the tax effective way of making money of stock right now. Maybe dividends will do a comeback? Regardless, I would be surprised if some stock -- say tesla -- remain high.
So a lot of small investors / average Joe get to declare tax losses so that a big fish that has greater control on the stock price might declare wins???
I am missing some clause I guess. I am not touching IPO implications as that is anothwr minefield and a lot of other threads are discussing it
It looks like Epic Games is a private company, so from what I understand in the proposal, this wouldn't affect him, since his shares are not publicly tradable. The proposal might affect him when/if he were to sell any shares, though, since it has a provision to accrue tax liability on illiquid assets like art/etc, to be owed at time of sale.
From what seems to be the intention of the tax plan it would be regardless of if the asset was available in a stock exchange so if the value of Tim's shares put him above the threshold he would still have to pay the tax. His wealth through epic would likely be less then if it were a publicly traded company though. The effect of paying tax on shares was always true as it becomes a realized capital gain and is already covered under the current tax system.
He could also attempt to sabotage the company's valuation in an attempt to maintain control.
As long as he has no legal fiduciary duty, it seems like an obvious thing to do. It's definitely what I would do.
And in 4 more years the new tax laws could be anything.
As long as he has no legal fiduciary duty, it seems like an obvious thing to do. It's definitely what I would do.
And in 4 more years the new tax laws could be anything.
The stories I see, like https://www.cnbc.com/2021/10/25/senate-democrats-push-for-bi..., says the tax on unrealized gains only applies to "tradeable assets." It doesn't seem like that would cover private companies. From what that article says, it would invoke an increased tax due to the deferral of taxes though.
there are liquid secondary markets.
Yeah, maybe they would count that.
Are those markets liquid enough to support large sales by the owners though?
Are those markets liquid enough to support large sales by the owners though?
It still seems problematic. Even if my company goes public, if I haven't actually sold the shares and made any money, why should this be taxed? If there are loopholes that let the founder avoid those taxes at sale time, fix those, but otherwise why should we effectively take away ownership of a company just because someone has built it up successfully.
One loophole is the step-up basis that applies when the owner dies. Not sure why that wasn't targeted instead (maybe because the current plan produces revenue more quickly?).
"Billionaire tax" plays better than "death tax" so we get tax policies that fit into 30 second commercials, not those that make economic sense.
So why not a "dead billionaire tax"? The heirs to fortunes seem likely to get even less sympathy than the ones who actually built them.
Reads like a cash grab to me.
Can't really say I'm shocked to learn a guy who would have to pay more taxes under the new tax plan opposes it.
Buffet/Gates/Bloomberg/Soros/Cuban have been saying for years the rich need to pay more taxes. Propose a tax increase that actually hits the super-rich and the screaming begins. Guess all along they meant the "other rich", anyone making 200k.
In the Twitter thread, Sweeney proposes a progressive capital gains tax maxing out at 75%. It would hit him personally, but still allow him to run his company. He’s not complaining about the magnitude of the tax. He’s complaining about the mechanism.
He's 'proposing' something he knows is politically impossible. I predict he will find a way to run the company and make billions of dollars.
No, it would never hit him in a meaningful way. He has no intention of ever realizing most of his capital gains.
I found quotes from Mark Cuban, but I’m not seeing any comments on this proposal from Buffett/Gates/Bloomberg/Soros. Can you share your sources?
I'm curious how new tax schemes like the proposal Sweeney is criticizing get vetted. It's probably impossible to determine actual economic effects of radical tax reform in advance. Further, from a rational perspective there's no incentive for the best minds to advocate loophole closure in tax schemes as there's more value in exploiting them.
I wonder if this is the kind of thing CNNs might be good at simulating some day.
I wonder if this is the kind of thing CNNs might be good at simulating some day.
What's to stop individual founders from setting up their "proxy" LLCs owned by them to own their stock? As LLC would be privately owned, they'd have no stock value, and their owners could not be taxed on the gains.
If LLC company does not qualify as a "corporate investor" like Sony or Tencent (from Tim's examples), is there a structure that does?
If LLC company does not qualify as a "corporate investor" like Sony or Tencent (from Tim's examples), is there a structure that does?
In American system corporations have personhood. In such context, why this new tax law applies only to individuals holding the stock and not to the corporations, banks, hedge-funds, etc. I genuinely do not understand! If it were to apply uniformly for all stock owners the absurdity of the proposal would become obvious.
Question I've had for a while.
Assuming a wealth tax gets through, couldn't the wealthy just take out a loan at near 0% against their stocks to pay the bill?
Could they get away without selling any stock at all?
Especially in an inflationary environment that many people think will get even more inflationary and a Fed that seemingly won't let the stock market crash.
Assuming a wealth tax gets through, couldn't the wealthy just take out a loan at near 0% against their stocks to pay the bill?
Could they get away without selling any stock at all?
Especially in an inflationary environment that many people think will get even more inflationary and a Fed that seemingly won't let the stock market crash.
In today's environment, yeah. But a few decades ago those loans would have interest rates more like 20%
Wouldn't the loans be fixed interest rates?
As far as I know, every sort of margin loan or pledged asset line of credit is indexed against the daily SOFR, LIBOR, or a similar benchmark (onto which the lenders add their profit margin, which is usually negotiable if you throw enough money at them). If you know any with fixed interest rates let me know, that'd be a helluva deal!
Beside of whether this particular tax reform bill is good or not, does it have any chance to survive in the current Supreme Court setup? If it's definitely not, I don't think it's a good idea to pursue it's going to shrink the future political possibility of taxing multi-billionaires.
[deleted]
A twitter reply says this:
> I think everyone needs to read the bill and calm down. "Gains on private assets -- including harder-to-value assets like real estate, art and private companies -- would escape the annual levy, and only be taxable when sold. "
So this wouldn't have even applied to Epic Games?
> I think everyone needs to read the bill and calm down. "Gains on private assets -- including harder-to-value assets like real estate, art and private companies -- would escape the annual levy, and only be taxable when sold. "
So this wouldn't have even applied to Epic Games?
That's really just another reason not to like it. It's a massive disincentivize to go public, because as described, everyone's stake will get whittled down to zero by this tax over time.
Would this also not affect angel investing/seed investing by individuals?
If there's no huge incentive for an investor once a company makes it to hold their stock, every successful company will be led by corporate hedge funds/investment firms.
If there's no huge incentive for an investor once a company makes it to hold their stock, every successful company will be led by corporate hedge funds/investment firms.
Seems to me stock asset taxes should be on the same order as real estate taxes...1% per year or so of total assets (with a very healthy carve-out/minimum). If it's truly 25% per increase that seems counter-productive.
The best way to fund Democrat programs is a value added tax. But of course nobody wants to talk about that. Every other country with significant social programs has a VAT. It’s not a coincidence.
Talk about property taxes next tim
[deleted]
A billion dollars ought to be enough for anybody.
Everyone in this thread is talking about how to properly tax. How about we remove taxes all together. Everything should be private other than roads.
Wait a minute, what's special about roads?
This is legitimately one of the dumbest, most boneheaded tax schemes I've ever seen the left devise. I'm all for taxing the rich, but not like this.
First, this creates a perverse incentive for founders to stifle the growth (or more specifically, in private companies: valuation) of their companies in order to avoid a high-tax event. This may actually be something the Board would approve, in some companies, because this high-tax event would involve the dilution of founder control; companies grant founders tons of shares for a reason, its because they're assumedly doing something to deserve it, and if the Board wanted those shares in someone else's hands they would have done that in the first place.
Second, this is again especially true for private companies but also applies to public ones: it adversely impacts American companies and American founders. We are a global society. If a strong, American company is forced to sell a significant portion of their shares, either on the public market or through private investors, in order to pay a large tax bill, who is going to buy those shares? Investors, generally, which includes entities both domestic AND FOREIGN. These taxable events will move significant wealth out of American hands and into foreign investment entities who are not subject to the same laws.
Third, many people don't realize that the total valuation of the stock market outweighs the total value of all US Dollars in circulation by ~30x (~$50T vs ~$1.5T). Tim could not be more right when he says that he's not really a billionaire, and Musk is not an almost-trillionaire. Stock wealth ISN'T REAL, and I don't just mean that in nebulous, floaty terms, I mean it in very physical, real, "If Democrats try to make stock market wealth real, they will destroy the economy, full stop, there are literally not enough US Dollars to represent the wealth of the US Stock market in real terms." Because taxes are paid in US Dollars, not in TSLA shares, these taxable events will reify a MASSIVE portion of fake-wealth currently tied up in the stock market, which is already significantly inflated due to the Fed's QE over the past decade.
Fourth, this is basically a "Delaware C-Corp" situation; the only reason this tax bill would generate so much income for the US Government is because it is new; billionaires haven't prepared for it. So, it'll make a ton of money, ONE TIME. Looking into the future, its unsustainable; it creates a massive incentive to offshore personal founder wealth, and possibly even citizenship and corporate headquartering. With COVID accelerating remote work, there's a ridiculously real possibility of companies, in the near near future, being founded outside the US, but still accessing as much US talent as they need. The USG can tax the middle class people who work for the company within their borders, but the rich founders? They're on an island. Ayn Rand was an idiot, but she wasn't wrong about everything; rich people will do anything to escape a tax bill.
But the dumbest thing, above all else, is how fucking self-servingly idiotic this bill is. I know our policymakers all share one brain cell, and Biden has been using it a lot recently, but this is beyond reproach. The democrats need money to pay for social programs. That isn't wealth redistribution; its a handout. That money will come from taxing American businesspeople, forcing them to sell shares, which will then be bought by other corporations and investment entities, and the wealth gap will just keep getting bigger and bigger; on the one side are average Americans who can't breach into the INSANE wealth inside corporate America, but are at least kept going on food stamps and free childcare. On the other side, people still insanely rich, just a little bit less so, and their companies are now owned by Tencent and the CCP.
The better path forward for some kind of wealth redistribution bill is something which creates incentives for companies to distribute significantly more corporate shares to more employees. I don't know what that looks like, specifically, but: Every single employee of every single company should see a portion of their compensation be represented as shares in the company, even if its just a handful, from the Waitresses serving tables at the Cheesecake Factory to the CEO who plans strategy. Ultimately this benefits the company, at least in some way, because it aligns financial success at every level, it benefits employees because its an additional vector for compensation which is anti-inflationary at a macroeconomic level (unlike a minimum wage increase, which is absolutely still necessary, but I don't feel is enough), it benefits tax revenue because many lower-wage roles will liquidate these shares very quickly (if possible) (a taxable event), and it benefits US political policy because it keeps ownership of many American corporations in the hands of Americans, rather than foreign investment entities.
First, this creates a perverse incentive for founders to stifle the growth (or more specifically, in private companies: valuation) of their companies in order to avoid a high-tax event. This may actually be something the Board would approve, in some companies, because this high-tax event would involve the dilution of founder control; companies grant founders tons of shares for a reason, its because they're assumedly doing something to deserve it, and if the Board wanted those shares in someone else's hands they would have done that in the first place.
Second, this is again especially true for private companies but also applies to public ones: it adversely impacts American companies and American founders. We are a global society. If a strong, American company is forced to sell a significant portion of their shares, either on the public market or through private investors, in order to pay a large tax bill, who is going to buy those shares? Investors, generally, which includes entities both domestic AND FOREIGN. These taxable events will move significant wealth out of American hands and into foreign investment entities who are not subject to the same laws.
Third, many people don't realize that the total valuation of the stock market outweighs the total value of all US Dollars in circulation by ~30x (~$50T vs ~$1.5T). Tim could not be more right when he says that he's not really a billionaire, and Musk is not an almost-trillionaire. Stock wealth ISN'T REAL, and I don't just mean that in nebulous, floaty terms, I mean it in very physical, real, "If Democrats try to make stock market wealth real, they will destroy the economy, full stop, there are literally not enough US Dollars to represent the wealth of the US Stock market in real terms." Because taxes are paid in US Dollars, not in TSLA shares, these taxable events will reify a MASSIVE portion of fake-wealth currently tied up in the stock market, which is already significantly inflated due to the Fed's QE over the past decade.
Fourth, this is basically a "Delaware C-Corp" situation; the only reason this tax bill would generate so much income for the US Government is because it is new; billionaires haven't prepared for it. So, it'll make a ton of money, ONE TIME. Looking into the future, its unsustainable; it creates a massive incentive to offshore personal founder wealth, and possibly even citizenship and corporate headquartering. With COVID accelerating remote work, there's a ridiculously real possibility of companies, in the near near future, being founded outside the US, but still accessing as much US talent as they need. The USG can tax the middle class people who work for the company within their borders, but the rich founders? They're on an island. Ayn Rand was an idiot, but she wasn't wrong about everything; rich people will do anything to escape a tax bill.
But the dumbest thing, above all else, is how fucking self-servingly idiotic this bill is. I know our policymakers all share one brain cell, and Biden has been using it a lot recently, but this is beyond reproach. The democrats need money to pay for social programs. That isn't wealth redistribution; its a handout. That money will come from taxing American businesspeople, forcing them to sell shares, which will then be bought by other corporations and investment entities, and the wealth gap will just keep getting bigger and bigger; on the one side are average Americans who can't breach into the INSANE wealth inside corporate America, but are at least kept going on food stamps and free childcare. On the other side, people still insanely rich, just a little bit less so, and their companies are now owned by Tencent and the CCP.
The better path forward for some kind of wealth redistribution bill is something which creates incentives for companies to distribute significantly more corporate shares to more employees. I don't know what that looks like, specifically, but: Every single employee of every single company should see a portion of their compensation be represented as shares in the company, even if its just a handful, from the Waitresses serving tables at the Cheesecake Factory to the CEO who plans strategy. Ultimately this benefits the company, at least in some way, because it aligns financial success at every level, it benefits employees because its an additional vector for compensation which is anti-inflationary at a macroeconomic level (unlike a minimum wage increase, which is absolutely still necessary, but I don't feel is enough), it benefits tax revenue because many lower-wage roles will liquidate these shares very quickly (if possible) (a taxable event), and it benefits US political policy because it keeps ownership of many American corporations in the hands of Americans, rather than foreign investment entities.
Just some counterpoints:
1. While there might be attempts to "juke" 409a valuations, a tax on capital appreciation still makes founders wealthier if their stock holdings appreciates in value. They might get 75 cents for every dollar of appreciation due to taxes, but it's irrational to think there isn't an incentive to continue growing their companies and wealth.
2. In order to maintain control of their companies, and avoid taxation, it's possible for companies to create separate classes of voting, non-voting, and sometimes super-voting shares. Even though only one of GOOG and GOOGL holds voting power, they still trade relatively closely in value.
3. Founders of privately held companies can choose who they want to sell their shares to. It's possible they might sell them to closely-tied venture capital firms or pension funds. I don't know why you're so concerned about foreign purchasers, when they already have the ability to purchase public and private companies. It's not like anything is changing in that regard.
4. The amount of currency in circulation might seem relatively small, but pales in comparison to the $29 trillion held in savings accounts and Money Market Funds. The NASDAQ had $300 billion in transactions on Tuesday October 26th, so dollar liquidity is hardly an issue. https://fred.stlouisfed.org/series/M2SL https://www.nasdaqtrader.com/Trader.aspx?id=DailyMarketSumma...
5. It's possible that some existing billionaires will attempt to avoid these taxes, but it's hard to expect that future founders will have the foresight to prematurely sacrifice founding their business in a country that attracts investment and talent.
It's certainly possible, but if founding a business in the USA is a common characteristic among billionaire founders, it's hard to imagine entrepreneurs who aren't yet billionaires will take their business somewhere else due to the potential future tax consequences of becoming a billionaire.
1. While there might be attempts to "juke" 409a valuations, a tax on capital appreciation still makes founders wealthier if their stock holdings appreciates in value. They might get 75 cents for every dollar of appreciation due to taxes, but it's irrational to think there isn't an incentive to continue growing their companies and wealth.
2. In order to maintain control of their companies, and avoid taxation, it's possible for companies to create separate classes of voting, non-voting, and sometimes super-voting shares. Even though only one of GOOG and GOOGL holds voting power, they still trade relatively closely in value.
3. Founders of privately held companies can choose who they want to sell their shares to. It's possible they might sell them to closely-tied venture capital firms or pension funds. I don't know why you're so concerned about foreign purchasers, when they already have the ability to purchase public and private companies. It's not like anything is changing in that regard.
4. The amount of currency in circulation might seem relatively small, but pales in comparison to the $29 trillion held in savings accounts and Money Market Funds. The NASDAQ had $300 billion in transactions on Tuesday October 26th, so dollar liquidity is hardly an issue. https://fred.stlouisfed.org/series/M2SL https://www.nasdaqtrader.com/Trader.aspx?id=DailyMarketSumma...
5. It's possible that some existing billionaires will attempt to avoid these taxes, but it's hard to expect that future founders will have the foresight to prematurely sacrifice founding their business in a country that attracts investment and talent.
It's certainly possible, but if founding a business in the USA is a common characteristic among billionaire founders, it's hard to imagine entrepreneurs who aren't yet billionaires will take their business somewhere else due to the potential future tax consequences of becoming a billionaire.
Watch progressives double down and spin this tweet as alt right.
First, and primarily, Tim Sweeny states: "If this tax scheme had been place, I’d have been forced to liquidate nearly my entire ownership." This is absolutely false.
The proposed law (legislative text available here: https://www.finance.senate.gov/chairmans-news/wyden-unveils-...) would not apply the tax scheme to Epic Games. At all.
See Section 491, which applies the new tax scheme to "tradable covered assets", and Section 497 which defines "Tradable Covered Assets". Those are defined assets traded on established securities markets or readily available on secondary markets. Epic Games is a privately held company, and not traded on established securities markets or readily available on secondary markets.
Additionally, the law allows each person to designate up to $1B of normally "tradable covered assets" as "nontradable covered assets". Which means if this law did apply to Tim Sweeny, it wouldn't have impacted his holdings by as much as he implies, as $1B of his assets is removed from his "assets" at the start of the calculation. This significantly reduces the amount of shares he would have to liquidate to cover his take burden.