[HN Gopher] IRS records reveal how the wealthiest avoid income tax
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IRS records reveal how the wealthiest avoid income tax
Author : danso
Score : 927 points
Date : 2021-06-08 09:49 UTC (13 hours ago)
(HTM) web link (www.propublica.org)
(TXT) w3m dump (www.propublica.org)
| williesleg wrote:
| Surprise! Well actually not.
| relaunched wrote:
| I not an advocate of a wealth tax, but there was something
| brought up in the article that is very interesting and requires
| more discussion.
|
| If you own a billion dollar in stock and you want to spend $8
| million this year, let's assume long term capital gains and a
| cost basis of 0. You sell $10 million worth of shares and are
| taxed 20% federally, costing you $2 million in taxes. Giving you
| $8 million to spend.
|
| Or
|
| You get a credit line $8 million, against your stock, without
| selling it, at a 3% interest rate. I draw down the line of credit
| and pay $240k per year to the bank. Before the new mortgage
| interest deduction was capped, you could get a credit line
| against your house and deduct the interest, thereby potentially
| only paying a portion of the $240k, because you'd get about 1/3
| back in deductions; let's say $160k.
|
| When tax professionals see that you could pay $2 million in taxes
| this year or $160k in interest per year, it becomes a no-brainer.
|
| It seems like the answer is to close that different or live with
| the loophole.
| ISL wrote:
| The devil is in the details. Should one attempt to tax unrealized
| capital gains, what is a workable way to do so? Would there be
| massive credits for paper losses? How does one value illiquid
| shares? Minority shares of private companies?
|
| The capital-gains step-up definitely is worthy of
| reconsideration. It is unclear to me why an asset's basis should
| change simply because someone died. If heirs don't sell, they
| won't owe the tax, but it makes sense that they would at the time
| of sale.
|
| Buffett has thought long and hard about these questions -- how to
| address inequities in tax burdens without breaking industry.
| Don't miss his reply to ProPublica (cited within the article):
| https://www.documentcloud.org/documents/20798866-buffett-sta...
| throwawayffffas wrote:
| My own suggestion for a solution, is to focus on the
| corporations instead of the individuals. Leave the system as is
| for individuals. But tax corporate revenue at a low percentage
| like 1% or something.
| reitzensteinm wrote:
| If you want a system that taxes unrealized capital gains, it is
| possible to defer the actual collection until the time of sale,
| but backdate the tax as though you bought and sold the asset
| each year under interpolated appreciation causing a taxable
| event.
|
| After each taxable event, the government would an increasing
| slice of the appreciating asset, which would itself compound.
|
| This essentially removes the incentive to buy and hold for tax
| purposes. It also means there's never any tax owing for paper
| gains.
| paul_f wrote:
| The biggest problem IMO with capital-gains step-up, is knowing
| the cost basis of the asset. If my uncle dies and leaves me his
| house, and he owned it outright, how do I know what he paid for
| it? It would put an impossible burden on heirs.
| ISL wrote:
| In that specific case, real-estate transactions often have
| sale prices in the public record.
| jkhdigital wrote:
| Yeah, and anyone who has had to spend some time digging into
| the nuances of capital gains taxation (e.g. active
| cryptocurrency traders like myself) soon realizes that almost
| all of the complexity is due to the intractable problem of
| timing: the decision to buy or sell an asset should be dictated
| by the economics of the asset itself, which generally has no
| relationship to the imaginary line between December 31st of one
| year and January 1st of the following year.
|
| I'm convinced that any rational and just approach to capital
| gains taxation must provide a mechanism for matching income to
| the holding period of the asset rather than the strict and
| arbitrary cutoff between calendar years.
| md_ wrote:
| Some countries do not tax capital gains except on professional
| traders (the criterion being something like, "is it your main
| line of work") but do tax wealth.
|
| That seems like a model which results in a meaningful tax on
| the ultra-rich while avoiding the complexities you mention.
|
| (For some reason, people always say, "But wealth taxes are
| really hard to enforce," which is really baffling to me since
| the US, somewhat uniquely, already requires citizens to go
| through a rather arduous reporting process for foreign assets.)
| IkmoIkmo wrote:
| The Netherlands is an example of such a country which
| effectively taxes wealth, not income. Technically it does tax
| income, but it's an assumed fictitious income based on your
| net wealth that's taxed, regardless of actual investment
| income or the nature of your investments.
|
| There's definite pros and cons to this. The obvious pros is
| that it's relatively easy to administer as you don't need to
| record investment income or losses. You only need to measure
| net assets periodically, which is not easy but definitely a
| lot easier.
|
| It also means fewer loopholes are possible. On the other
| hand, those loopholes aren't set in stone, they're a human
| construct. Choosing to tax wealth instead of capital gains is
| a choice, just like the deductions and valuation rules and
| carryforwards and carrybacks are choices for capital gains
| taxes, which can be changed. But in general again here,
| taxing wealth is the simpler approach.
|
| The obvious cons is that it goes against basic principles of
| taxation that many people agree with (but seem to let go, at
| large amounts). The basic principle is: only if you earn
| money, you're supposed to share some of it to taxation to
| fund public goods and the less fortunate. That's why we tax
| added value, or profit, but not turnover. Taxing wealth means
| those with losses or no-income, still get taxed and lose
| money.
|
| In the Netherlands there've been many court cases against the
| state precisely because of this. People with $200k in
| savings, a zero-appetite for (risky) investments in stocks or
| bonds, are losing their own money (for which they've already
| paid either income tax or inheritance tax to gain) to taxes
| without any income.
|
| But it's more than that, even those who have large investment
| returns would feel it. (although here I would say, that's
| okay and entirely the point. Still it can be surprising to
| what extent). Paul Graham has written about how a small
| seemingly innocuous wealth tax (e.g. 1% per year) can really
| bite you over-time here: http://www.paulgraham.com/wtax.html
|
| This is true essentially regardless of your average level of
| return, whether it's 0% or 5%.
|
| What the wealth tax does do is push you into riskier
| investments. If you pay 1% and have say a 1% savings account,
| your effective investment income tax is 100% and you slowly
| lose purchasing power to inflation. It almost forces you to
| invest in higher return, but riskier assets, like stocks. At
| the same time, people like me who average 20% returns per
| year so far, are very much undertaxed by a tiny 1% wealth tax
| (as there's no other capital gains tax in the Netherlands).
| It also very much favours leveraged investments, as it's a
| tax on net wealth, favouring heavy use of debt (particularly
| popular in Dutch real estate markets). Suppose you somehow
| borrow 99%, invest 1%, and average only a 1% net return on
| your total investments, you're still earning a 100% return
| which is then taxed at just 1%. It's a strange system indeed,
| not sure what system would be best, but wealth tax systems
| have some obvious flaws as well.
| bestcoder69 wrote:
| I feel there's a rhetorical trick where detractors of the
| current US system are expected to create the perfect
| system, when the US one is very very far from ideal (e.g.
| generates little revenue, burdens the wrong people, any
| everyone hates it). No matter what we have to make
| arbitrary decisions just to have a workable decision.
|
| (This isn't really a direct comment against your post, it
| just got me thinking.)
|
| That's all to say, I'm dead curious how we could simulate
| the effect of the Netherlands tax system here and how much
| better/worse off the median family would be under it.
|
| Simple but too easy answer is "much better" by skipping the
| simulation and looking at the actual stats in the
| Netherlands and other Nordics.
| md_ wrote:
| Well, all tax schemes are about balancing potential
| perverse incentives or other warping effects against the
| social interest of, you know, collecting tax revenue.
|
| I am a little bit skeptical of the assumption that a
| wealth tax encourages riskier investment strategies,
| though. After all, the effect of a fixed rate wealth tax
| is the same irrespective of your investment strategy;
| riskier strategies still yield both greater potential
| returns and losses.
| IkmoIkmo wrote:
| > I am a little bit skeptical of the assumption that a
| wealth tax encourages riskier investment strategies,
| though. After all, the effect of a fixed rate wealth tax
| is the same irrespective of your investment strategy;
| riskier strategies still yield both greater potential
| returns and losses.
|
| Yes you're fully correct, in principle it should be no
| different financially. But for people holding straight up
| cash, there's a psychological hit to seeing your nominal
| amount of money go down due to a tax bill. If you hold
| $100k and it turns into $99k, then $98k, then a few years
| later $95k, you'll feel some drive to compensate those
| losses. If you hold $100k and it stays that much, a lot
| of people feel very comfortable and safe with keeping it
| just like that. (particularly in Europe where many
| countries don't have as much of a direct stock-investing
| culture traditionally, and where stocks are still seen by
| many as a form of gambling, or a world full of scams
| where only a few clever people profit, particularly the
| older generation).
|
| For example in many European countries banks now charge
| minor negative interest (e.g. -0.5%) on your savings
| account (due to the negative deposit facility rate of the
| ECB). Suddenly there's an uptick of people who take their
| savings and invest it, because otherwise they'd 'lose
| money' and actually see their savings drop over time
| simply by holding it in a bank account.
|
| However, these same people happily let that cash sit for
| 10 years at an inflation rate averaging 2%, losing 20% of
| their purchasing power in this time, responding
| differently to a universe in which inflation was 0% but
| the bank or taxes took the same 2% a year. They also
| happily ignored opportunity costs of various low-risk
| assets (e.g. a 3y savings deposit) that they could've
| invested in but didn't. Compared to letting the cash sit
| idly, the 2% inflation or 2% opportunity costs on low-
| risk asset-returns were happily ignored, yet when a -0.5%
| interest rate is charged by a bank, many spring into
| action. It's likely because while it may not be
| financially as bad, psychologically seeing $100k turn
| into $99k, or literally seeing interest charges being
| deducted from your account, feels worse than if $100k
| stays $100k nominally but is only worth $98k in real
| terms due to inflation, even though that's worse.
|
| The fixed wealth tax works a bit similar. You have all
| these people who, every year, receive a tax bill, and are
| seeing a chunk of their savings having to be sent to the
| tax authorities. It inspires people to seek out financial
| advisers to help them compensate this. If at least you're
| compensating the fixed tax bill with a return on the
| stock market for example, it doesn't feel as painful.
|
| Anyway that's what I'm seeing among friends/family and
| cobbling together from various sources, but it's just a
| hypothesis.
| 1980phipsi wrote:
| I'm sympathetic to your point on step up basis, even though I
| don't have an issue with the current US exemption on estate
| tax.
| nullc wrote:
| Comparison to forbes numbers is super duper spurious, a move that
| is only justified by the fact that it generates shocking
| headlines.
|
| The article fails to substantiate its main thesis-- that the
| taxes on cap gains aren't eventually paid.
| koheripbal wrote:
| Summary:
|
| 1. Capital Gain taxes are delayed until you actually sell the
| stock.
|
| 2. Corporate taxes are being reduced because companies are moving
| profits to foreign jurisdictions.
|
| 3. Estate taxes & income taxes are being avoided by the creation
| of charitable foundations.
|
| The 2nd and 3rd points are very valid, and I wish the author had
| spent more time on them. Unfortunately instead, the author spends
| much more time on point 1, conflating wealth with income, and
| avoiding the obvious argument that capital gains are _eventually_
| taxed - the rich are not escaping that.
|
| ...unless point 3 (foundation) occurs. And that should be the
| main story.
|
| Squabbling over a wealth tax is not useful. The real issue is
| that the super rich create these personal "foundations" that act
| as never-taxed income holes, and then use them as personal and
| political tools.
|
| In total, there's nothing very revealing about this article. It's
| everything we've already known. IMO, we need to curb foreign tax
| havens, and severely limit tax exemptions for charitable
| donations.
|
| A more interesting question is how did ProPublica get a copy of
| Jeff Bezos' tax returns. Seems like a leak at the IRS?
| smitty1e wrote:
| > The real issue is that the super rich create these personal
| "foundations" that act as never-taxed income holes, and then
| use them as personal and political tools.
|
| Opinions may differ, but one major point is that our tax system
| is a joke.
|
| If we can put a movie about flying humans to the moon on
| Netflix, why can't we implement a tax system that isn't a
| Byzantine train wreck?
| bsedlm wrote:
| > why can't we implement a tax system that isn't a Byzantine
| train wreck?
|
| because of lacking political incentives?
| hackeraccount wrote:
| Lacking? The incentives are in geared towards a high rate
| with lots of deductions, certainly on the business side. If
| I'm running a business I don't want a low rate or low
| regulation - I want a high rate with loopholes narrowly
| tailored to whatever I'm doing and a high regulatory
| burden. Politicians want exactly the same thing.
|
| It's not exactly the same with non-business tax rates but
| it's not that far off either - see the deduction for SALT.
| ansible wrote:
| > _... why can 't we implement a tax system that isn't a
| Byzantine train wreck?_
|
| Because the people with power (money) like it this way. They
| aren't interested in what is fair for everyone, they are only
| interested in what they can get away with.
|
| The rich can afford to hire a team of lawyers and accountants
| to navigate the tax system, and pay almost nothing. But they
| have to keep the fiction up that they are paying tax by
| having their "on the books" tax rate be non-zero.
| throwaway210222 wrote:
| > why can't we implement a tax system that isn't a Byzantine
| train wreck?
|
| The Hong Kong tax code is about 250 pages.
| nilsbunger wrote:
| The biggest issue is that when you die, your assets get a "step
| up in basis" so the gains until then won't ever be taxed.
| gxs wrote:
| Regarding it's not tax until it's sold, this isn't necessarily
| true.
|
| One little trick here is to take out huge loans using things
| like stock holdings as collateral.
|
| You're not paying tax on the money, and you can pay it back a
| bunch of difference ways that can limit how much you pay.
|
| There are nuances to this, it's not as straight forward as I
| mentioned, but that's the general idea.
| kylestlb wrote:
| "conflating wealth with income"
|
| The author(s) explicitly do NOT conflate these and point that
| out several times.
| hnburnsy wrote:
| The authors conflated right here...
|
| "The results are stark. According to Forbes, those 25 people
| saw their worth rise a collective $401 billion from 2014 to
| 2018. They paid a total of $13.6 billion in federal income
| taxes in those five years, the IRS data shows. That's a
| staggering sum, but it amounts to a true tax rate of only
| 3.4%."
|
| Income taxes paid divided by increase in net worth, how is
| this NOT conflating?
|
| No one's definition of 'true tax rate' is calculated this
| way.
| 1cvmask wrote:
| The charity "scam" is brilliant because it is the hardest to
| argue against by the masses.
| jollofricepeas wrote:
| Nah. The author states clearly that wage earners don't have
| assets other than homes.
|
| The facts are:
|
| "By the end of 2018, the 25 [wealthiest Americans] were worth
| $1.1 trillion.
|
| For comparison, it would take 14.3 million ordinary American
| wage earners put together to equal that same amount of wealth.
|
| The personal federal tax bill for the top 25 in 2018: $1.9
| billion.
|
| The bill for the wage earners: $143 billion."
| missedthecue wrote:
| Don't think this is a useful comparison because wealth isn't
| taxed. Income is. If you take the top 1% of earners, they
| make 20% of the income, but pay 38% of the taxes.
| CPLX wrote:
| Depends on what you mean by how much they "make"
|
| The distinction between capital gains and wage income is
| heavily coded into law, but that doesn't make it a
| distinction that SHOULD be treated in the way that it is.
| oblio wrote:
| > If you take the top 1% of earners, they make 20% of the
| income, but pay 38% of the taxes.
|
| And that's normal.
|
| If I make $1k per year, taxing me is almost criminal, since
| I can barely afford to feed myself.
|
| If I make $100k per year, taxing me $20k year is kind of
| annoying, but manageable. I'll probably have to avoid some
| bigger expenses I would have made if I were not taxed at
| all.
|
| If I make $100m+ per year, taxing me $40m per year doesn't
| even change my lifestyle. It just gives me topics to bitch
| about at dinner time, but it doesn't change my life in any
| material way.
|
| The more I have, the more I can afford to give away without
| it impacting me or my family in any realistic way. Except
| for losing ego points.
| hackeraccount wrote:
| I understand the point but I question if reality works
| that way. No one looks at a tax bill and says "what have
| I got left after it?" They just look at the bottom line.
| And it doesn't matter if you've got a $100m in the bank
| or $900m - $40m is a lot of money.
|
| Avoidance is a more or less a fixed cost. It's the price
| of tax attorneys and Congressman. To the degree you go
| over that fixed cost it's going to be harder and harder
| to get the amount. The biggest surprise to me is always
| just how much the rich pay not how little.
| sagarm wrote:
| Diminishing marginal utility is a basic economic concept.
| hackeraccount wrote:
| You're correct. I know that I got a lot more utility out
| of the first $100 I ever made then a $100 now. I don't
| think mentally it tracked perfectly though - that first
| $100 was a lot but I knew in the larger scheme it wasn't
| really a lot of money and today I'll still price show to
| save $100 even though I know it's not a lot in terms of
| my income.
|
| I have no economic concept for this but I strongly
| suspect it's true.
|
| How about this? If you go rooting around underneath my
| couch cushions you'll find quarters. If you do the same
| for Bill Gates' couch you'll find ... Not $100 bills.
| Even if in respect to his entire wealth a $100 is less
| then nothing to Bill Gates he can still see the utility
| that money has in the world at large and that changes how
| he views it - maybe he doesn't see it the same way I do
| now or I did when I was 15 but he'd value it more then
| would be expected in relation to his over all wealth.
| saint_abroad wrote:
| > 1. Capital Gain taxes are delayed until you actually sell the
| stock.
|
| By far, the greatest increase in wealth (and inequality) is due
| to capital gains.
|
| > [...] capital gains are eventually taxed
|
| Normally, one might sell assets before a decline, and at that
| point gains (and therefore taxes) may be realised.
|
| This is avoided by HODL stock in holding companies (such as
| Berkshire Hathaway) which can rotate assets without ever
| incurring capital gains (or indeed income).
| yaroslavvb wrote:
| 1. You don't have to sell the stock -- one could fund an ultra-
| wealthy lifestyle by renting expensive things, using stock as
| collateral. As your stock goes up in value, so does the value
| of things you have access to.
| asimpletune wrote:
| This is a little random, but I had received stock as part of an
| acquisition, which I had to pay taxes on as if it were income.
| Now, if I sold that stock, do I have to pay taxes again?
| Negitivefrags wrote:
| You pay capital gains tax on the difference in the price when
| you received it, and the price you sold it for.
| rebuilder wrote:
| Presumably only on the capital gains, assuming any. So if the
| stock was taxed as being valued at X when you received it,
| and you sold it at x + y , you'd need to pay taxes on y.
| bradleyjg wrote:
| > and avoiding the obvious argument that capital gains are
| eventually taxed - the rich are not escaping that.
|
| Not so, because of the step up basis at death. That provision
| allows the capital gains tax to be not just postponed, but
| eliminated.
| jquery wrote:
| So get rid of the step-up basis at death. There is no good
| reason for that to exist.
| bradleyjg wrote:
| I agree, but even Biden's opening gambit, which I believe
| has very little chance of passing as is, doesn't eliminate
| it entirely. It seems to have powerful supporters.
| zentiggr wrote:
| Go ahead and lobby Congress to pass that. See how easily
| you can get that done against the lobbying from the holders
| of that wealth.
|
| Now how do we change the system? Put it in front of the
| entire public how much higher a percentage of their wealth
| they give up compared to these few, and get the entire
| public to fight for equity.
| aetherson wrote:
| For ordinary people, sure. But the estate tax kicks in at
| anything above $11M, and is 40%.
| DetroitThrow wrote:
| The estate tax in America has been called the voluntary tax
| for a reason - it's almost never paid on at the rate you
| quote by anyone who can do the leg work to set up legal
| entities which can make the effective tax rate 0% - which
| ends up being trivial for billionaires: https://archives.cj
| r.org/the_audit/bloomberg_waltons_how_bil...
|
| Even a quick Google search yields articles describing a
| (very incomplete) list of loopholes one can use to make the
| estate tax not something one has to "worry about":
| https://smartasset.com/taxes/5-ways-the-rich-can-avoid-
| the-e...
| aetherson wrote:
| Perhaps, though all of those things have downsides and
| limitations. But the idea here is not defending all the
| intricacies of the US tax code. It's simply noting that
| the gloss of the article that somehow it's a giant
| scandal that unrealized cap gains aren't taxed is dumb.
| Supermancho wrote:
| Ironically, when saying it's well know that the wealthy
| avoid taxes", gets downvoted in another thread.
|
| https://news.ycombinator.com/item?id=27090450
| koheripbal wrote:
| Which is why we need to curb these non-profit donations
| and trusts.
|
| The estate tax rate itself is fine - the issue is the
| exemptions.
| bradleyjg wrote:
| I love how in America everyone is middle class. $10 million
| estate---that's totally ordinary!
| humanrebar wrote:
| If the lower bound on estate taxes are too low, certain
| kinds of capital intensive family businesses like farms
| take a big hit as they pass from generation to generation
| -- in a world where they generally have a net
| disadvantage to corporations already.
| bradleyjg wrote:
| I also love how the family farm remains a universal
| justification even as it's almost entirely disappeared
| from American life. It's similar to how every American
| child knows what a pig and cow sound like despite almost
| none of them having seen one. Our culture is funny.
|
| That aside, I'm not arguing for a lower estate tax
| threshold. I'm arguing for an elimination of the state up
| basis at death, at least for assets which the estate tax
| has not been paid.
|
| If Joe Farmer's kids keep his $10 million farm, they
| won't pay any taxes. But if they sell it, they ought to
| have the same basis as Joe would were he still alive.
| koheripbal wrote:
| Most small businesses - even those little shops owned by
| immigrants, are valued in the millions.
|
| The step up basis will probably be limited or eliminated
| this year with Biden's tax plan.
| ipaddr wrote:
| I would say most kids have seen a pig or a cow either at
| a farm, driving past a farm or going to the zoo (zoos are
| a common experience for most average kids).
| Woberto wrote:
| I don't remember seeing pigs or cows at any zoos I've
| been too. Have you? I've certainly driven past cows in
| fields, but a child living in a city may not experience
| that. I think pigs are even more rare since they don't
| seem to be kept outside.
| jessaustin wrote:
| There's really no reason other than custom that
| appropriate numbers of pigs couldn't be raised and
| slaughtered in any city. They can subsist entirely on
| table scraps, the disposal of which is a regular burden
| for cities. They don't require lots of room to roam. They
| do produce effluent, but that is only a burden at mega-
| farm volumes. An individual hog will produce roughly what
| an individual human will produce, but only when it
| approaches the right size to butcher. Eventually this
| will seem normal, if only because chicken husbandry is
| growing more common all the time in many cities.
| kingaillas wrote:
| Zoos I've been to tend to have more exotic animals -
| giraffes, elephants, zebras, lions, monkeys, etc. I think
| a zoo would prefer to direct its budget/resources towards
| these kinds of animal attractions.
|
| In the U.S., a pettings zoos or a county fair might have
| pigs, cows, and others like goats, horses, etc. Working
| animals or ones that kids/families raise for
| contests/shows, say the 4H society or FFA.
| DetroitThrow wrote:
| Keep in mind, not even a couple dozen family farms have
| to pay any estate tax any given year, and that number is
| getting smaller: https://www.cbpp.org/research/federal-
| tax/the-federal-estate...
| pydry wrote:
| https://dailyyonder.com/farmers-estate-tax-
| myth/2017/09/20/
| ashtonkem wrote:
| That's the convenient excuse that anti-estate tax
| advocates use, yes.
|
| In reality it would be pretty easy to setup the tax code
| to avoid such issues, but instead we've whittled the
| estates tax down to nothing to benefit heirs of the ultra
| wealthy.
| titzer wrote:
| I come from a long line of farmers. It hasn't been
| possible to have a "family farm" for 4+ decades. Any
| profitable farm has 1000+ acres and is basically a
| corporation.
|
| I know the intent of your comment is to support family
| farms, but now these tax incentives have become perverse
| and really only benefit rich people, not family farmers.
| aetherson wrote:
| We were talking about Jeff Bezos. An $11M deduction on
| his estate would leave more than 99.99% of it taxed.
| ashtonkem wrote:
| Assuming he actually pays it.
| tootie wrote:
| But are the assets liquidated? If ownership of assets just
| transfers to heirs, then they'll just pay the tax whenever
| they cash out.
| bradleyjg wrote:
| That's the point, the heirs don't have to.
|
| Suppose I own $1 million worth of Bitcoin I mined back in
| the day. If I sell the day before I die I'll owe $200,000
| in long term capital gains taxes. But if I die, leave those
| coins to you, and you sell them the day you inherit them
| for the same $1 million, you owe no capital gains taxes.
|
| Edit: if this is surprising, it should be. The step up
| basis is insane.
| taeric wrote:
| Yeah. I've tried to convey this point to family before.
| I'm not sure why they don't believe me. They are
| convinced the "death tax" is some nefarious thing.
| mlindner wrote:
| The proposed "death tax" idea is to make inheritance a
| taxable event. I'm against that. I'm for however that
| capital gains carry past death.
|
| If you inherent cash, that cash has already had taxes
| paid for that. It shouldn't be taxed again like some
| "death taxes" propose to do. If you inherit stock, then
| sell it, the basis date for that stock should be the date
| it was bought, not the date you received it.
| nobodyandproud wrote:
| It's not a bad compromise. Even that, I'm sure, would end
| up getting mangled over technicalities and added
| loopholes.
| taeric wrote:
| Sorta. Inheriting cash is no different than being gifted
| cash. And you would have to report that as income.
|
| It only gets complicated with capital assets. And your
| proposal works for simple stock holdings.
|
| Consider, if you are the beneficiary of a retirement
| account, you already have to withdraw percentages every
| year. So that is covered? Or not?
| mlindner wrote:
| > Sorta. Inheriting cash is no different than being
| gifted cash. And you would have to report that as income.
|
| Right and I don't think gifts should be taxed either.
| It's already been taxed.
| taeric wrote:
| On this, we'll just have to disagree. :(
|
| At some level, most (all?) money has already been taxed.
| Some entities can write off expenditures as a deduction.
| Most of us can't.
|
| Consider, my income had already been taxed. Why do I have
| to pay sales tax on purchasing something?
|
| Edit: and in case you fix on sale's tax being different
| from income. Payroll for businesses comes out of profit.
| Which comes from that same transaction. So, somebody's
| income is ultimately funded from a sales made with money
| that had been taxed.
| abstractbarista wrote:
| I think that's good and correct. The inheritor hasn't had
| any capital gain. Because the deceased never sold, they
| didn't either.
| singron wrote:
| If the inheritor somehow has no capital gain, shouldn't
| the entire basis be taxed as income instead?
|
| E.g. if I win a car in a contest or get paid in stock for
| working, I have to pay income tax on the current value
| when I receive it.
| beervirus wrote:
| When you die, your estate pays taxes on the current value of
| the assets you're passing along. Without stepped up basis,
| your heirs would get taxed again on gains that you
| essentially already paid a 40% tax on.
| notfromhere wrote:
| Taxes happen when money changes hand, it's not something
| out of the ordinary.
| beervirus wrote:
| I agree. I'm just talking about whether stepped up basis
| is fair or unfair.
| bialpio wrote:
| Correct, exactly the same way as if you'd realized some
| gain a day before your death. Your heirs are also taxed
| again on the money you earned as a regular income. This is
| more of an argument against estate tax, not against step-
| up-basis.
| bradleyjg wrote:
| I think it would be perfectly reasonable to reset the basis
| on any asset which had 40% estate taxes paid on it, but
| that's now how the law is written. Not only is there an $11
| million lifetime exemption there's also an annual gift tax
| exclusion that combined with some clever trust setups allow
| the wealthy to pass on much more than that without paying
| the 40%.
|
| In practice huge amounts of capital gains are not taxed by
| either the capital gains tax or the estate tax.
| beervirus wrote:
| The yearly gift tax exclusion is peanuts for a
| billionaire. The 11 million almost rounds to zero too.
| koheripbal wrote:
| Neither of your points impact Billionaires. They are
| meant to save small business owners.
| bradleyjg wrote:
| Eliminating the step up basis would have no impact on
| small businesses owners so long as they remain owners.
| mattmcknight wrote:
| The basis should at least be inflation adjusted.
| bradleyjg wrote:
| I agree. The law should:
|
| - eliminate the step up basis at death entirely
|
| - index the capital gains basis to chained CPI
|
| - give a credit to heirs for estate taxes paid which can
| only be used to offset the capital gains on inherited
| assets up to the basis at death
| darkerside wrote:
| Ahh the old death loophole...
| mc32 wrote:
| I'm just surprised more wealthy people aren't taking
| advantage of that obvious one.
| thanatos519 wrote:
| You can't take it with you, but your _estate_ can? WTF.
| koheripbal wrote:
| The step up basis only applies to estate taxes below the
| federal limits, so it doesn't apply to super-rich. ...another
| point (deliberately?) omitted from OP's article.
|
| Step up basis might get eliminated in any case, as the Biden
| Administration is proposing to remove it.
| bradleyjg wrote:
| That's not quite right. The step up basis applies to
| everyone.
|
| It is true that if estate taxes are paid on the gains then
| the step up loophole hasn't completely eliminated taxes on
| capital gains. However, the estate tax is even more full of
| loopholes than the capital gains tax. See for example the
| Grantor Retained Annuity Trust.
|
| Finally, the Biden administration is not proposing to
| eliminate the step up basis entirely, unfortunately, but
| merely rein it in some.
| inigojonesguy wrote:
| Looks like a confirmed prediction from The Sovereign
| Individual.
|
| Probably familiar to many of you, but I have my coke and mentos
| moment while I read it, in 2021. Here is a link to archived
| pdf, for others like me
|
| https://web.archive.org/web/20210112042733/https://www.lopp....
| Trias11 wrote:
| >> ... we need to curb foreign tax havens
|
| Luckily US cannot police other countries (not that it didn't
| try) to prevent people from taking advantage of more
| competitive tax regions outside of US.
|
| US obsession with taxing people and businesses to the ground is
| a strong contributor for so much capital escaping US.
| sobellian wrote:
| Capital gains are eventually taxed if you ever sell, but some
| individuals will just hold and take out loans against their
| enormously large amount of collateral to avoid incurring
| capital gains tax.
| lovecg wrote:
| This argument is repeated a lot but I never understood the
| mechanics. Wouldn't they have to pay back the principal +
| interest, from a supposedly taxed source of income? This
| sounds like a scheme to delay taxes and optimize cash flow,
| but not a way to avoid taxes altogether?
| bklyn11201 wrote:
| It's all about deferring to death and then hoping for the
| best possible tax treatment at death allowing basis step-up
| and avoiding estate taxes via various trusts.
| onlyrealcuzzo wrote:
| I created this spreadsheet to show that the difference is
| pretty trivial IFF you ever cash out (<2% over 10 years).
|
| However, a lot of people:
|
| 1) never plan to cash out.
|
| 2) know that tax rates are fickle and plan for a day when
| there will be extremely low tax rates - just like for
| companies to "repatriate" their profits - and hope that
| they can in the future realize with little-to-no profits
| (although, I doubt capital gains tax rates will go much
| lower, and might actually go MUCH higher).
|
| Anyway - the difference before you realize is >13% over 10
| years (and the higher the rate of return is, the bigger the
| difference - it's >17% with a 10% per year return, which is
| historically average for the extremely wealthy according to
| Piketty).
|
| Here's the sheet: https://docs.google.com/spreadsheets/d/1d
| Z6h0s2lZBp0fM6Z2w1K...
|
| This strategy isn't really popular unless you have a
| networth of greater >$20M. It's particularly attractive,
| because you get $40k in untaxed capital gains per year -
| which is roughly what you need to pay the interest on your
| "borrowed" / "pretend unrealized" capital gains. And, the
| added benefit is, the interest IS TAX DEDUCTIBLE!
| ghaff wrote:
| To the degree that someone isn't so concerned about passing
| down the maximum amount of wealth, there are also a number of
| things that can be done to turn appreciated assets into an
| annuity through an existing non-profit of some sort. (e.g.
| using a CRUT).
| anonu wrote:
| Great summary and sensible conclusion. The problem is much of
| the NYT and ProPublica writing are wrapped in sensationalism
| and start from an extreme left position on the subject.
|
| I'm totally supportive of "taxing the uber wealthy"... But govt
| needs to take the long approach on this. Eventually, people die
| and inheritance kicks in. That's where these generational mega
| wealth transfers that don't do much good for society can be
| mitigated.
|
| The document leak probably has a banal explanation. Some
| insider with access to the documents...
| ccn0p wrote:
| The article also points out that "in the coming months" it'll
| reveal more. Although I agree this isn't that interesting, just
| judging by the income reported Buffett, Bezos, Musk, paid 19%,
| 23%, and 30% respectively (not counting obviously massive
| stakes in unrealized gains)... the outlier here is Bloomberg at
| 3%.
| [deleted]
| [deleted]
| spikels wrote:
| > capital gains are _eventually_ taxed
|
| Not if you never sell. At death the "basis" is reset to the
| current market price. All those capital gains accumulated
| during a lifetime are never subject to capital-gains tax.
|
| There is currently a proposal to eliminate this loophole which
| was originally intended to deal with the difficulty of
| determining the history of a dead person's assets. Obviously
| this doesn't apply to the extremely rich with accountants,
| lawyers and financial advisors.
| evancox100 wrote:
| On point 1, it's also important to realize there is a step up
| in basis when inheriting or donating appreciated stock
| jandrese wrote:
| > avoiding the obvious argument that capital gains are
| eventually taxed - the rich are not escaping that.
|
| I used to think this too until my wife inherited some stocks
| from her grandmother. Turns out the strike price is reset when
| you inherit and you dodge all of the capital gains tax.
|
| This turned out to be a major win for us because her
| grandmother had acquired the stocks when she worked for AT&T
| back in the Ma Bell days and had not paid attention to them for
| 50 years. The paperwork was a complete mess and we had zero
| idea what the strike price would have been on stock she got as
| part of her normal income some time in the 50s and had been
| split up and recombined so many times in the mean time.
| 9wzYQbTYsAIc wrote:
| > A more interesting question...
|
| From their other article,
| https://www.propublica.org/article/why-we-are-publishing-the...
|
| "We do not know the identity of our source. We did not solicit
| the information they sent us. The source says they were
| motivated by our previous coverage of issues surrounding the
| IRS and tax enforcement, but we do not know for certain that is
| true. We have considered the possibility that information we
| have received could have come from a state actor hostile to
| American interests. In particular, a number of government
| agencies were compromised last year by what the U.S. has said
| were Russian hackers who exploited vulnerabilities in software
| sold by SolarWinds, a Texas-based information technology
| company. We do note, however, that the Treasury Department's
| inspector general for tax administration wrote in December
| that, "At this time, there is no evidence that any taxpayer
| information was exposed" in the SolarWinds hack."
| boringg wrote:
| This seems like a state-sponsored hack to reveal this
| information (Solarwinds?). Way too much information for one IRS
| employee to leak.
|
| I would be incredibly surprised if anyone who had that kind of
| access to IRS returns (ie searchable database for everyone)
| would leak the 25 top earners. It does add up for the career
| risk to take that risk on especially as its not leaking
| anything illegal just shining a light on the injustices of the
| system.
| jorvi wrote:
| > IMO, we need to curb foreign tax havens
|
| That depends on what you mean. The US government (and a lot of
| US citizens) think that the tax on money Apple earns on selling
| iPhones in Europe belongs to the US, not France. But I feel if
| an iPhone is sold in a French building by a French person to
| another French person, with money transfered between two French
| bank accounts, all of that in French society, that that tax
| money belongs to the French and the US needs to keep its grubby
| paws off of it. No bullshit 'if you bring it back in the US we
| will forgo half of the tax on it and protect you
| internationally from the fallout'.
| dukeofdoom wrote:
| Fringe, whacky ideas are getting funded and their bad ideas
| given fuel to spread, and boosted on social media. Just
| thinking back how laughably bad of an idea communism was, and
| how many lives it cost. Just because you're a billionaire does
| not mean you should be playing a social engineer.
| nlh wrote:
| I have what I hope is a genuine question here:
|
| > we need to ... severely limit tax exemptions for charitable
| donations
|
| Why do we need to do this? Wouldn't the natural incentive-based
| result of this be a huge reduction in charitable donations?
| It's essentially an asset transfer from charitable causes to
| the government. I'm not sure I understand why that's default
| good.
| gilbetron wrote:
| https://www.nytimes.com/2018/08/03/business/donor-advised-
| fu...
|
| It's complicated and corrupt, basically.
| koheripbal wrote:
| If donations were going to 3rd party charitable
| organizations, maybe (though they are notoriously
| inefficient/corrupt themselves), but if you are simply
| transferring the money to an organization under your full
| control anyway, then it's not _really_ a charitable
| organization.
|
| This distinction is so hard to make, that I think it simply
| makes more sense to limit donations to a much smaller percent
| of AGI.
|
| The current limit of 60% is so high, that most donations at
| that level are providing some sort of unspoken utility to the
| benefactor.
| kristjansson wrote:
| Even a charitable organization the donor fully controls
| must follow regulations on its activity. Surely some people
| use their foundations as personal piggy banks, but that's
| fraud and is pursued as such.
|
| It's like a conservation agreement. The land (wealth)
| remains in control of the owner, but the state gets some
| say in its use and the public benefits. Abuse of the the
| system is a case for stricter enforcement; sanctioned but
| objectionable uses are a case for stricter regulations
| wing-_-nuts wrote:
| >but that's fraud and is pursued as such.
|
| Our former president would beg to differ
| kristjansson wrote:
| Sadly true, though he did get get sued by the NYAG and in
| settlement agreed to a raft of restrictions on his
| charitable service, as well as the closure of the
| foundation and return of $2m in misused funds[0]
|
| [0]:https://ag.ny.gov/press-release/2019/donald-j-trump-
| pays-cou...
| airstrike wrote:
| > Even a charitable organization the donor fully controls
| must follow regulations on its activity.
|
| Conversely, even a charitable organization _not run_ by
| the donor may be heavily influenced by a disproportionate
| donor such that it is _de facto_ controlled by them.
| kristjansson wrote:
| So they get to set organizational policy, but still can't
| compel the organization to do illegal things (like route
| the donors money back to them tax-free)
| koheripbal wrote:
| Yes, but these regulations are not well policed. They
| effectively take the accounting books provided at face
| value.
|
| It's almost never investigated, and there is, in the
| normal course, so much overlap between expenses that
| benefit ME as a person, and ME as the owner of the
| charity.
|
| Travel is a big one, for example.
| kristjansson wrote:
| Probably a fair complaint. I'd question whether enough
| people with foundations take bald-face risks with enough
| of the assets to be relevant to tax policy.
|
| More pedestrian stuff (eg expensing a conference in
| Seychelles) definitely slips through, but we could make
| the same principal-agent complaint about business
| expenses or other settings where one person gets to spend
| money from different buckets that are taxed differently.
|
| I'd challenge the notion that the rules are unenforced
| though - someone will have questions if you're living in
| a house your foundation purchased or somesuch. At the
| very least several people with an obligation to know
| better and much less to lose we're going to be very
| nervous.
| ryandrake wrote:
| This type of misbehavior is widespread, too. These
| foundations are not limited to the ultra wealthy. Tons of
| even moderately rich people (say, tens of millions in
| wealth) take advantage of these vehicles. Pumping their
| income into "charity" where charity is not Habitat For
| Humanity, but "MR JOHN B ENTREPRENEUR CHARITABLE
| FOUNDATION LLC". The foundation is run within a
| millimeter of the law, and basically funds the owner's
| lavish lifestyle tax-free. It's such an obvious scam but
| since it's just barely legal, nobody bats an eye. And if
| anyone questions the practice, you have people coming out
| of the woodwork saying "why are you against charities
| like Habitat For Humanity?"
| MangoCoffee wrote:
| Howard Hughes Medical Institute - In 1969, Representative
| Wright Patman "complained that the Hughes foundation was a
| tax-evasion device," noting that the institute spent only
| $5.7 million for its operations between 1954 and 1961, a
| period during which Hughes Aircraft accumulated $76.9
| million in profits. By 1975, it had also avoided certain
| stipulations of the 1969 reform act for charitable
| institutions due to legal filings by Hughes to change its
| operational status, with his objections going directly to
| the White House.
|
| https://en.wikipedia.org/wiki/Howard_Hughes_Medical_Institu
| t...
|
| It seem like a good loophole for the rich to have control
| on where their charitable money goes to and do what. you
| can argue the Gates foundation is the same but Bill Gates
| actually doing some goods with his charitable organization
| like someone else said, if the charity is being use like a
| little piggy bank for the rich then its a crime.
| refurb wrote:
| Seems like laws already exist around legitimate
| charitable institutions. If those aren't being enforced
| now, what makes you think new laws will be?
| bialpio wrote:
| If the existing laws are not enforced, maybe it's time to
| remove, or at least rethink the exemptions then?
| lordlimecat wrote:
| Not a tax lawyer but I'm pretty sure there are regulations
| around what it means to be a charitable organization
| according to the IRS.
|
| For instance, I'm fairly certain that using the money in a
| way that provides you a tangible benefit is verboten, as is
| taking a deduction for a "donation" to said charity that
| results in a tangible benefit.
|
| Whether these things are enforced or violated is another
| question; but it does not seem reasonable to assume that
| every such organization operates by fraud, nor that getting
| rid of all of them would be no loss.
| fallingknife wrote:
| I'm not convinced that most charities really get much done
| other than making their donors feel good. I think the
| government is actually more efficient. And I'm saying that as
| someone who really doesn't like the government.
| ike77 wrote:
| I'm pretty sure a lot of them really invest in the common
| good.
|
| The issue is more with the ones that actively promote the
| interests of their founders.
|
| https://en.wikipedia.org/wiki/Koch_family_foundations
|
| https://en.wikipedia.org/wiki/Cato_Institute
|
| https://en.wikipedia.org/wiki/The_Heritage_Foundation
|
| Are just a few examples of far right think tanks that are
| tax exempted.
| hackeraccount wrote:
| What charity doesn't promote the interests of the people
| giving it money? Who doesn't believe their interests are
| for the common good?
|
| If the problem is that you think some interests should be
| promoted and other not - well, I'm all in favor of that.
| The two of us just need to sort out which will be
| favored. My plan is for me to decide and you to agree
| with me. Sound good?
| brnt wrote:
| They are using the deductions we grant for their purpose.
| Seems to me we should at minimum be aware of the fact we
| are ceding control over the country for no good reason.
|
| In some cases, evidence is fairly clear that the
| charities are used to actively undermine our society even
| further, e.g. Kochtopus.
| hackeraccount wrote:
| Fairly clear? That's the standard? I'm going to stick
| with my proposal that I get to decide what charities are
| destroying America and which one's are helping it.
|
| Who's with me on this?
| brnt wrote:
| Have you read the book? What part was not clear to you?
| sagarm wrote:
| The foundations listed are basically political entities.
| When you or I make political donations, we have to do it
| with post-tax money. Why shouldn't the wealthy have to do
| the same?
| hackeraccount wrote:
| If I give money to the NRA, the EFF or NARAL it's all tax
| deductible. That's what all the people mentioned are
| doing.
| storf45 wrote:
| Really??? Like the government needs more tanks and F-35s.
| bretpiatt wrote:
| I encourage you to go take a look at the larger 501(c)3
| non-profit "aka. charities" in your area. Here's a few from
| San Antonio where I live:
|
| Haven for Hope (transformational campus to combat
| homelessness) https://www.havenforhope.org/
|
| San Antonio Food Bank (part of a national network of food
| banks) https://safoodbank.org/
|
| Catholic Charities, Archdiocese of San Antonio (I'm the
| Board Chair, we run ~40 programs meeting people where they
| are and helping them on a path to self sufficiency)
| https://ccaosa.org/
| jdikatz wrote:
| Typical estimates suggest a 1% increase in tax expenditure on
| charitable deductions (so government forgone revenue due to
| deductions) leads to a more than 1% increase in charitable
| giving, so deductions increase social spending (see p170 in
| https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.25.2.157)
|
| But could be distributional issues as well depending on where
| the rich choose to donate -- lots of that money is probably
| implicit transfers from government revenues to the Met
| koheripbal wrote:
| This logic is similar to trickle down economics. It's not
| useful. Government expenditures have a high multiplier as
| well, so even if true it's not better than tax revenue.
| jdikatz wrote:
| Should have been more precise. By "social spending" I
| mean sum of (tax revenue) + (donations to charities),
| since 1% decrease in revenue translates to >1% increase
| in donations to charity. Agreed that this says nothing
| about "net social benefits," since it depends on the
| value of government vs. social spending.
|
| My point is only that the elasticity is above 1, since if
| it were _below_ 1 then there would be literally no
| justification for deductions. In that case, 1% reduction
| in tax revenue from deductions would lead to a _less
| than_ 1% increase in giving, so the government could
| increase aggregate funding for charities by killing
| deductions and issuing grants. Elasticity >1 opens the
| door for deductions being sensible depending on
| objectives and use of funds by gvt vs. charities.
|
| Note this is _not_ a spending multiplier, so the
| comparison with government spending multipliers is
| irrelevant. The relevant comparison there would be, for
| example, GDP (or ideally the "social") impact of each
| dollar in charitable spending. I don't know what that is
| and it probably varies by charity.
| HenryKissinger wrote:
| People should be giving to charities out of the good of their
| heart, not to get a tax deduction. The tax deductibility of
| charitable donations makes them no cost options for the
| donor. Remove the tax implications, and you will see who
| really cares about their cause.
| bitcurious wrote:
| For the sake of argument, assume a flat 20% tax rate for a
| minute.
|
| Scenario A: Your taxable income is $1,000,000. Your tax
| liability is $200,000. You pay your taxes, you net
| $800,000.
|
| Scenario B: Your taxable income is $1,000,000. Your tax
| liability is $200,000. You donate $200,00 to charity. Now
| your taxable income is $800,000 and your tax liability is
| $160,000. Your net income is $640,000.
|
| The only scenario where a charitable contribution doesn't
| lower your overall income is
|
| Scenario C: you commit fraud.
| justanotherguy0 wrote:
| You're forgetting that you can donate appreciated assets
| for their market value without realizing the capital
| gains as income.
| rattray wrote:
| Scenario D: You donate $800,000 to a foundation you
| control. Your net income is $960,000 ($160,000 cash and
| $800,000 with some strings attached).
| kristjansson wrote:
| If they cut a string, or even pull on one a bit too much,
| they're right back at C.
| zentiggr wrote:
| Assuming anyone can get the AG to actually investigate,
| file charges, and get a conviction.
|
| Notoriously more difficult as the amount of financial
| leverage increases.
| AussieWog93 wrote:
| (Legitimate) tax deductible donations aren't no-cost. You
| can only use it to reduce your tax at the marginal rate you
| pay.
|
| If, for example, you were in the 30% tax bracket and gave a
| $100 deductible donation, you'd only reduce your tax
| liability by $30 (ignoring edge cases) - ie you're still
| $70 out of pocket.
| Tycho wrote:
| How does this make sense. It's "tax deductible" because you
| are giving the income away instead of keeping it. _Of
| course_ people would give less if they had to give the
| government a cut.
|
| "I want to give a million pounds to charity."
|
| "That's nice of you. You still need to pay tax first on
| that sum, though."
|
| "OK I want to give PS600,000 to charity."
| bdefore wrote:
| Why should whether it's given away or not mean that
| government shouldn't receive the same share?
| brotherofsteel wrote:
| Why should the state get any of it, regardless of what I
| spend it on?
| Tycho wrote:
| That's just the way it works. There's numerous
| alternative arrangements and arguments in favour and
| against.
|
| You could think about if the owner of a business
| generously decides to give all his employees a pay rise -
| the government now receives less money because the
| employees pay a lower marginal tax rate than what the
| owner would have paid if he kept the money for his own
| higher salary. Should the government get involved here
| and claw back that lost tax?
| adwn wrote:
| > _Remove the tax implications, and you will see who really
| cares about their cause._
|
| Yes, and donors should be whipped proportionally to the
| size of their donation - then we'll see who really,
| _really_ cares about their cause.
|
| > _People should be giving to charities out of the good of
| their heart [...]_
|
| It's not up to you to decide people's motivation for being
| charitable.
| alok-g wrote:
| My understanding is that donating to charity, which would
| ideally be for the good of the common public, is
| purposefully encouraged, and that is not fundamentally
| different than giving money to the governments as taxes. In
| other words, someone may believe more in a given charity
| spending money towards social good than on the government
| itself.
|
| I see some arguments along these lines here:
|
| https://theconversation.com/explainer-why-are-donations-
| to-s...
|
| Excerpts:
|
| * The main argument for tax-deductibility of donations is
| that it is a form of government assistance or subsidy for
| what are considered publicly beneficial causes.
|
| * A third argument is that indirect support mechanisms,
| such as tax-deductibility of donations, facilitates choice.
| So, taxpayers can direct a certain proportion of their tax
| to causes they choose, rather than the government
| determining how it should be spent.
| jameshart wrote:
| And the counterargument to that would be:
|
| Directing money to a charity, to avoid the money going to
| the government, is explicitly a way of directing your
| money away from the _common_ good of the public (which is
| after all theoretically what the government would spend
| it on) and towards the _specific_ spending goals which
| the donor supports. The idea that a wealthy person has a
| 'better' idea of how to spend their money than the
| collective will of the people expressed through
| government is fundamentally antidemocratic.
|
| A billionaire spending money through a charity that
| promotes a particular kind of schooling, rather than
| paying the money as taxes into the general fund where it
| would be used to fund education as directed by a
| democratically elected government, is basically a way of
| using their wealth to obtain a bigger-than-one-vote say
| in how education spending works, and to bypass democratic
| decisionmaking about how to spend money for the common
| good.
|
| Of course, democracies are imperfect decisionmakers and
| they may not always reflect the spending priorities that
| will maximise collective good - but at least as
| institutions they are intended to balance interests, and
| provide a measure of fairness and equality in how
| decisions are made. And why would we believe that
| individual wealthy charity donors will make better
| decisions on how to direct spending?
|
| An individual billionaire deciding that all schools
| should work the way _they_ would prefer _might_ be a
| positive way to end-run around institutional inertia and
| advance the state of schooling for everyone; or they
| might just pay to have every school library stocked with
| books about how humans coexisted with dinosaurs. They 're
| one person, unconstrained by how the rest of society
| would like to improve schools.
| alok-g wrote:
| Your points are valid. I agree mostly. I was only
| answering HenryKissinger who missed both your and my
| points.
|
| >> The idea that a wealthy person has a 'better' idea of
| how to spend their money ...
|
| The word 'wealthy' can be taken out here. The said choice
| is being given to others too if we let go of the nitty-
| gritties.
|
| I agree also that I have no reason to believe that
| donations should be entirely tax free. The optimal point
| may be at giving say 10% of the donation amount as
| rebates while the remaining 90% still is subject to
| taxes. May be that optimum is at 0% rebate also.
|
| >> and provide a measure of fairness and equality in how
| decisions are made
|
| Overall, I do agree to your point. Fairness in decision
| making is more important.
|
| Equality however is different from fairness though.
| Equality and efficiency bear tradeoffs. See here: https:/
| /en.wikiversity.org/wiki/10_Principles_of_Economics
|
| Also, I do not see how high earners being subjected to
| higher taxes is fair (to them). In my opinion, the very
| premise of taxes being proportional to income has flaws.
| See my comment here:
| https://news.ycombinator.com/item?id=27433973
|
| >> is basically a way of using their wealth to obtain a
| bigger-than-one-vote say in how education spending works
|
| If my viewpoint in the linked comment above of constant
| income tax is accepted, then the rich may not even have a
| bigger-than-one-vote to begin with. Overall, I agree to
| you though.
| PaulDavisThe1st wrote:
| > Also, I do not see how high earners being subjected to
| higher taxes is fair (to them).
|
| The fundamental model behind progressive taxation is that
| the _pain_ of paying taxes should be roughly the same
| regardless of income level. The notion of "pain" in this
| context is closely tied into the concept of marginal
| utility of income: how much value does a given person get
| from receiving an extra $X in income (or conversely, how
| much do they lose by not having $X in income). Give an
| extra $1000 to person who only earns $12k/yr, and it's a
| pretty big impact. Given an extra $1000 to a person who
| earn $12M/yr and its just noise. Taxes follow the same
| principle, but in reverse. When we tax those with very
| high incomes, we want them to feel the same "pain" of
| taxes as those with lower incomes. Because of marginal
| utility, that requires different marginal tax rates.
|
| > the very premise of taxes being proportional to income
| has flaws.
|
| Taxes are _not_ proportional to income. We have marginal
| tax rates, not all-income tax rates. Someone who earns
| $40k /yr pays the same taxes on the first (and only) $40k
| (likely close to zero) as someone who earns $4M/yr.
| Someone who earns $200k/yr pays the same taxes on that
| $200k as the person who earns $200M/yr.
| alok-g wrote:
| >> The fundamental model behind progressive taxation is
| that the pain of paying taxes should be roughly the same
| regardless of income level.
|
| Good point. I'll think more on this.
|
| One thing though which makes this non-obvious: We are in
| an equibrium system where demand and supply rebalancing
| change things. Economic utility and purchasing power of
| $1000 is the same whether someone earns $10K or $10MM per
| month. For somplicity sake, if all are made to pay
| $30,000 per year in income taxes, those who earn less
| would stop working, however, the demand-supply rebalance
| would either raise their income levels or the industry
| would have a higher drive for innovating and inventing to
| automate those jobs. In a similar fashion, with lesser
| taxes for the super-riches, more people would incline
| towards doing startups, etc. When that rebalancing is
| considered, the point of equalizing pain does not remain
| obvious to me anymore, as of now. :-)
|
| >> Taxes are not proportional to income. We have marginal
| tax rates, not all-income tax rates.
|
| Yes, I had made an approximation when writing
| "proportional". Marginal tax rates makes the income taxes
| grow _faster_ than proportional with the income, whereas
| I am arguing for a constant income tax. :-)
| PaulDavisThe1st wrote:
| > Economic utility and purchasing power of $1000 is the
| same whether someone earns $10K or $10MM per month.
|
| Marginal utility of the $1k is not independent of income,
| even if purchasing power (almost irrelevant in this
| context) is. This is just basic economics.
|
| > more people would incline towards doing startups, etc.
|
| This seems naive. The rich do not, in general, do
| startups. The super-rich in particular do not do
| startups. Maybe you mean "invest in startups", which is
| an entirely different thing, since it presupposes the
| existence of startups to invest in. There is zero
| evidence from anywhere in the world that reducing
| taxation on the super rich results in any notable
| increase in investment activity.
|
| I have no idea what this "rebalancing" that you're
| referring to is. I see no evidence that economies in the
| real world are in equilibrium states, nor any reason to
| suppose that they would be.
|
| > For somplicity sake, if all are made to pay $30,000 per
| year in income taxes, those who earn less would stop
| working,
|
| This thought experiment seems fairly pointless. This
| isn't going to happen. And if it did happen, people would
| not stop working. People need to eat, etc. Depending on
| the enforcement of the tax, they would have to find more
| or less ingenious evasion methods.
| alok-g wrote:
| Your broader points could very well be valid.
|
| I'll think some more.
|
| If there are some mathematical works showing what you
| have explained, I would like to read. :-)
| mcosta wrote:
| > or they might just pay to have every school library
| stocked with books about how humans coexisted with
| dinosaurs
|
| And what about when it is the government who wants to
| place these books?
| jameshart wrote:
| Vote. Run for office. Lobby.
|
| All things you can do to affect government action that
| are unavailable to you to affect private philanthropy.
| cableshaft wrote:
| Are they able to count contributions to organizations
| that lobby on issues that benefit their business, or to
| politicians (like a SuperPAC) that would vote favorable
| to them as charitable contributions? Because if that's
| the case that's kind of shitty. I honestly don't know
| though, just occurred to me that might be another way
| they're taking advantage of this.
| alok-g wrote:
| That's indeed a valid point, and I bet there would be
| instances of the same where the charitable contribution
| serves self-interests besides tax savings.
| bradleyjg wrote:
| A tax deduction is essentially a matching grant from the rest
| of the tax payers. I don't know that I'm totally opposed to
| the idea, but it's ripe for abuse and conceptually difficult
| to fully define in such a way as to eliminate any possibility
| of such abuses.
|
| Why not instead have people donate their own money to causes
| they believe in, and have no matching grants?
| lotsofpulp wrote:
| That is exactly the reason to be opposed to them. There's
| zero reason for them to exist, other than to enable
| corruption and enabling a way to direct your taxes towards
| your own tribe (churches, synagogue, etc) rather than the
| public as a whole.
| drdec wrote:
| > Capital Gain taxes are delayed until you actually sell the
| stock. > Squabbling over a wealth tax is not useful.
|
| I agree that a wealth tax is not the way to go. But there are
| other ways to skin this cat. The big takeaway I got from the
| article missing in your summary is that the wealthy take loans
| secured by unrealized gains in order to finance their
| lifestyle.
|
| So what if we found a way to make a rule that using unrealized
| gains as collateral for a loan was, for tax purposes, the same
| as realizing the gains? (You might need to tweak the rule for
| fairness but the basic point remains.)
|
| I think aggressively closing loopholes in the current code
| could go a long way (you mentioned a couple, like charitable
| donations and tax havens).
| tornato7 wrote:
| If you take loans secured by unrealized gains, don't you need
| to eventually sell some of those gains to repay the loan? You
| can only take out so many loans until the interest starts
| stacking up.
| pnutjam wrote:
| You can manipulate the payment of taxes and only pay off
| the loans when you have other offsets to avoid paying
| taxes. 9 years no taxes, year 10 I pay off my loans and
| donate a chair to a University.
| dahfizz wrote:
| The solution would be to close the other loopholes used
| to not pay taxes on year 10.
| pnutjam wrote:
| Please, there are no legislative solutions open to
| America. We get one shot, so it needs to go big.
| brianfitz wrote:
| This would also affect most home owners. They purchase a
| home, it goes up in value, and they refinance or take a
| second loan rather than sell the property. The wealthy do
| this as well with property, art, and securities. Trying to
| tax unrealized gains (like a home that has appreciated in
| value) would be a new mess of tax legislation with holes you
| could drive a semi-truck through.
| telchar wrote:
| This sort of wealth tax probably would be targeted at
| amounts over a $5-50M threshold so it would never hit the
| primary residence of anyone except billionaires, who could
| surely pay cash.
| brianfitz wrote:
| So we've created one loophole. What if I buy multiple
| properties below the threshold? Is the limit per
| household? If so, does this apply to people heavily
| leveraged with little net worth who own many rental
| properties? The rent is income, but they often make
| improvements to the homes and take a cash-out refinance
| to pay for the cash down payment on a new property. If we
| do this to homes, and the wealthy move their money to a
| new place, such as venture capital, do we try and re-
| price those illiquid assets each year? If one IPO's and
| they take a loan against the stock to buy a home, do you
| give them their previous year's mark-to-market payment
| back to them if the stock goes down the following year
| and they get a margin call? I'm just going through a few
| scenarios but this would quickly inflate the tax code to
| an almost unmanageable state without creating just as
| many more new loopholes. Imagine trying to grow a startup
| and being worth X on paper with no actual gains or money
| in the bank. If you don't include it, it suddenly becomes
| a tool for someone else to use within the assets you've
| excluded. If you don't exclude it, you may force an early
| sale of promising new businesses to their competitors to
| cover a tax bill on the unrealized gains.
| drdec wrote:
| > The rent is income, but they often make improvements to
| the homes and take a cash-out refinance to pay for the
| cash down payment on a new property.
|
| This is pretty much the situation that the tax is
| designed to combat - people using their assets to
| increase their wealth without paying taxes. So yes, if
| you did that, you would need to pay taxes on the new
| money in the refinance. I don't see an issue if that
| makes this business model unprofitable or untenable.
|
| > If we do this to homes, and the wealthy move their
| money to a new place, such as venture capital, do we try
| and re-price those illiquid assets each year?
|
| There's no need to price anything. You value the assets
| put up as collateral as the amount of the loan they are
| securing.
|
| > If one IPO's and they take a loan against the stock to
| buy a home, do you give them their previous year's mark-
| to-market payment back to them if the stock goes down the
| following year and they get a margin call?
|
| Nope. It's just like selling and immediately re-
| purchasing.
|
| > Imagine trying to grow a startup and being worth X on
| paper with no actual gains or money in the bank.
|
| Ok, but nothing happens unless you borrow against it. I'm
| not sure what scenario you are imagining here.
| hansvm wrote:
| > There's no need to price anything. You value the assets
| put up as collateral as the amount of the loan they are
| securing.
|
| People take out loans for much more or less than the
| value of the collateral. Do we ban that, or do we open up
| another tax/laundering loophole by letting the official
| value of a property diverge arbitrarily from a
| hypothetical sale value?
| telchar wrote:
| The taxable amount would be the loan amount, not the
| value of the property. The loan is trivial to value. If
| the property later sells for less than the loan amount
| then it would be a capital loss that could be carried
| forward from there.
| reedjosh wrote:
| And the tracking of all transactions over $10,000 used to
| be a reasonable limit.
| PaulDavisThe1st wrote:
| We already have special treatment for capital gains in the
| form of a primary residence. No reason that couldn't
| continue.
| brianfitz wrote:
| The special treatment is at the time of sale. My comments
| were in response to taxing the appreciation at the time
| of a new loan (such as taking a second mortgage).
| drdec wrote:
| The idea is to treat a loan against an asset with capital
| gains as a sale. So one would have to pay taxes out of
| the loan and then you get a stepped up basis.
|
| The exact rules could be tweaked to keep it from being a
| burden on families taking a second mortgage, e.g. if you
| borrow less than a certain amount in the tax year perhaps
| the rule doesn't apply. Use your imagination.
| aantix wrote:
| >the wealthy take loans secured by unrealized gains in order
| to finance their lifestyle
|
| Eventually they have to sell stock to pay back the loan?
|
| Aren't they just delaying the taxation?
| HWR_14 wrote:
| If they delay taxation until death, the asset's basis
| resets and the only tax owed would be estate tax.
| bklyn11201 wrote:
| Exactly, they are just delaying taxation. If their
| investments return less than loan interest, they will need
| to begin selling assets to pay the loans. If their equity
| compounds at a rate higher than the interest rate, then
| they can continue to defer until death where they can pass
| on to heirs and take advantage of basis step-up.
|
| https://www.thebalance.com/how-the-stepped-up-basis-
| loophole...
| lend000 wrote:
| I've seen this idea posted a few times without data, and it
| isn't convincing. The wealthy need to pay back those loans,
| and realize gains in order to do so. Sure, they can maintain
| a higher average debt/expenses ratio collateralized by
| unrealized gains, but the real problems here are:
|
| 1. When they do realize gains, the tax brackets are severely
| broken such that someone realizing $2Billion in capital gains
| pays a lower effective rate than someone with 1/10000th that
| number in income.
|
| 2. We live in a financial environment in which the Fed will
| rescue the stock market no matter what, creating asset
| inflation and making this a relatively reliable strategy,
| whereas there should be more theoretical risk in doing this.
| Bear markets, albeit painful, are the only times in recent
| history where wealth inequality decreases as the economy
| corrects and reallocates capital [0]. Staving them off at all
| costs for the last few decades via easy monetary policy is
| arguably one of the greatest contributors to the rise in
| wealth inequality, alongside poorly graduated income tax
| brackets and (to a lesser degree) automation.
|
| Chart: [0] https://fred.stlouisfed.org/series/WFRBST01134
| larkost wrote:
| In many of the cases of those loans, they are structured to
| be payable only after the death of the person receiving the
| loans. And at that moment the cost basis for all of the
| investments goes to the price at the end of the day of
| death... bypassing all of the capital gains taxes. That is
| the real problem there.
|
| I do completely agree that treating capital gains more
| favorably than earned income is just crazy (even though I
| personally benefit from it).
| lend000 wrote:
| Do you have a source for this? I just struggle to believe
| that lenders would make loans like that on a large scale,
| without some major caveats.
| TheCoelacanth wrote:
| I don't think the loans actually need to be structured
| like that to achieve the same effect. You can just pay
| off the loan by taking out another loan.
|
| There would be some risk that you couldn't get another
| loan, but if you're only borrowing 10% of your net worth,
| it's probably an extremely small risk.
| mewpmewp2 wrote:
| Related to the topic, what is interesting, is Switzerland
| home loans. When usually countries have max periods of
| 20-30 years, Switzerland has periods of 50-100 years, so
| you very well would not pay it back before end of your
| life.
| the-rc wrote:
| There's another aspect to consider, perhaps: nowadays it's
| very easy to get to get that kind of loans with low, low
| interest rates, well below average market returns. So, if
| you have a large collateral, you could just use a chunk of
| the loan to repay interest. I hope my math is not wrong,
| but if you borrow $100K with a 3% APR -- even mere
| millionaires can get better terms than that -- after 10
| years, you've had to pay "only" $35K in interests. You
| could use part of the original loan to pay that, or you
| could get a new one, assuming your collateral has
| appreciated. Neither of those require realizing gains,
| right? You just keep pushing them into the future, until
| you finally die and your heirs' cost basis gets reset.
| bendbro wrote:
| > So what if we found a way to make a rule that using
| unrealized gains as collateral for a loan was, for tax
| purposes, the same as realizing the gains? (You might need to
| tweak the rule for fairness but the basic point remains.)
|
| Lenders will quickly adapt to give loans without requiring
| collateral
| reaperducer wrote:
| _the wealthy take loans secured by unrealized gains in order
| to finance their lifestyle._
|
| It's even worse than that. The interest on those loans is tax
| deductible, according to the New York Times:
| https://www.nytimes.com/2021/06/08/us/politics/income-
| taxes-...
| HWR_14 wrote:
| The interest being tax deductible isn't too bad. If they
| had to pay taxes on the capital gains as soon as they
| borrowed against it, it would be a fine way for them to
| finance their lifestyle
| TimPC wrote:
| Capital gains being delayed is not a direction we want to
| pursue. There are huge problems with unsellable stock in
| venture-backed start-ups and other situations where you can
| end up owning a massively valued asset that you can't sell to
| pay the taxes on. Said asset could go to zero without you
| ever realizing money. I don't think people should lose their
| start-up stock over taxes, or face putting their entire
| wealth on the line on a gamble the company pays off. Keep in
| mind it's not unheard of to have stock worth $2+ million for
| an early employee in a company that goes to zero. Even more
| relatable to the average person: If your house price goes up
| too quickly you can be forced to sell to afford paying the
| capital gains on it.
| unclewalter wrote:
| To me, the parent wasn't saying an asset holder would need
| to pay taxes on the asset unless they used it as
| collateral. To me, this makes a lot of sense. If someone
| owns a startup and worries tax implications would
| overextend them if the value was taxed, they shouldn't use
| it as collateral on a loan.
|
| I may be missing your point though.
| rapht wrote:
| I agree with you. This makes even more sense as in: if a
| lender lends you $x against a collateral of N shares,
| this means that they consider that there is only a tiny
| chance that said shares may be worth less than $x before
| the maturity of the debt. So this means that for all
| practical purposes we could decide that there are at
| least $x of realised gains. (In a more extreme version
| you could even consider that all your shares, and not
| just the N shares used as collateral, should be valued at
| $x/N per share and treat the gain as a capital gain for
| tax purposes)
| yebyen wrote:
| But you basically always do use your house as collateral
| on the mortgage loan. I think this is a more radical
| change than you have realized.
| lupire wrote:
| That's different, because the house is collateral for
| _itself_ , effectively a "rent to own", not for money
| that can be spent elsewhere.
| saalweachter wrote:
| You could pin it to when loans are _issued_ rather than
| their existence.
|
| That would only affect home _refinancing_ , which will
| still be a considerable number of people.
| nmfisher wrote:
| I agree, I don't see why income tax couldn't be levied on
| any amount greater than $X borrowed/secured by an asset
| as collateral.
|
| For all intents and purposes, it is income and should be
| taxed as such.
| koheripbal wrote:
| I don't see why we care that they're using an asset as
| collateral for a loan. They still need to pay back that
| loan with post-tax money.
|
| Maybe they're kicking the can down the road, but that's
| their choice.
|
| The real issue here is that super rich are, at the end of
| that road, donating shares to their non-profits, tax
| free. ...and that their children then have access to that
| non-profit and all of its assets, again without income or
| estate tax.
|
| The big hole here isn't the unrealized gains - it's the
| "charitable Foundations" that are a complete scam.
| pas wrote:
| > and that their children then have access to that non-
| profit and all of its assets, again without income or
| estate tax
|
| That shouldn't matter as long as they don't start to
| enjoy the benefit of those assets.
|
| This means tax rules should separate the estate as a
| business/investment from the personal use of the
| funds/wealth.
|
| Sure, at some point it becomes neigh impossible, like
| let's say Bill and Melinda went to Africa on their
| marriage anniversary, was that business or personal? (And
| yes, at that level of wealth, influence, income it's
| _always_ both.)
|
| When an owner (or close relative or friend of an owner)
| of a family trusts/foundations/estates/NGOs/church/non-
| profit conducts business through said entity, that entity
| should pay some tax corresponding to said expense as if
| some part of that expense were income to the
| owner/relative/friend.
| ljf wrote:
| In the UK at least, the 'trick' is that the load is never
| actually repaid, or is continually deferred.
| ric2b wrote:
| > Maybe they're kicking the can down the road, but that's
| their choice.
|
| I can't just say "Oh, I'm investing 30% of my income, tax
| that part when I sell later", I don't have that choice of
| kicking the can down the road.
| TimPC wrote:
| Collateral for a loan is a completely separate point. The
| issue was taxing unrealized capital gains. Effectively if
| your house goes up $100,000 you'd owe the government the
| capital gains tax on $100,000 immediately, not when you
| sold. If you don't have the money to pay for the capital
| gains you're looking at selling the asset. Finding the
| money to pay capital gains while paying down a mortgage
| isn't a direction I'd want to go in.
| klyrs wrote:
| As I understand the proposal, you wouldn't owe the tax on
| $100k immediately -- that would only happen when you use
| the house as collateral for a reverse mortgage or
| similar. This makes sense to me, because the capital
| gains are effectively realized when used as leverage.
| somedudetbh wrote:
| Of course, in the USA, outside of California, this is
| essentially what we do.
|
| We can argue about whether or not it's good, but its not
| unthinkable. Property taxes in most places (in the USA,
| the subject of the article) are linked to the current
| market value of real estate. Sometimes property values
| rise, taxes follow, and people have to move.
| TimPC wrote:
| Property taxes are such a small portion of property value
| that they seldom force a move. Capital gains can be
| anywhere from 20-50% depending on country. Having your
| home go from 800,000 to 1,000,000 and having your
| property taxes go from 4000 to 5000 a year is very
| different from having your home go up 200,000 and
| suddenly owing the government 40,000 to 100,000 dollars.
| jbay808 wrote:
| I'd be happy if I could give a percentage of the shares
| themselves to the government as a tax payment (paying tax
| on the shares specifically), so I don't have to worry about
| the risk that they're overvalued by the tax agency.
| TimTheTinker wrote:
| You might be OK with being taxed in the form of some of
| your stocks, but would you want to be taxed partial
| ownership of your real estate based on increase in its
| market value? What about private high-risk equity in a
| venture you started by risking all of your own money? It
| could go to zero (or millions) in a decade, but for now
| the government becomes an increasing shareholder because
| of its current YoY volatility...
|
| Taxing non-income wealth increases by any means
| incentivizes the government to manipulate the prices of
| those assets -- and more than any other entity, the
| government possesses the power to do so through
| regulation and legislation.
|
| It also makes the government the eventual largest capital
| owner, which could create all sorts of unintended
| consequences. It could sit on those assets indefinitely
| (like it does its liabilities) instead of selling and
| using the money to fund itself. There's a special kind of
| poverty that exists when the government owns almost
| everything.
|
| Also, there's a big difference between legal worth at a
| given time and fungible value at that time. The
| difference (or lack thereof) between the two could itself
| create all sorts of opportunities for gaming the system
| when _fungible_ value becomes a basis for being taxed.
| jbay808 wrote:
| It would be OK with me as long as I could buy back the
| government's stake in my house from the government by
| paying the tax in dollars.
| lupire wrote:
| Huh? The government owns a percentage. The asset doesn't
| really matter. It would be a lein, to pay back at exit,
| not a voting share or whatever.
| teachingassist wrote:
| OK. You seem to be agreeing that this would be a fine
| system with those caveats.
|
| So: Exemptions specifically covering residency already
| exist in finance law. If you go bankrupt, you can still
| live in your house (only if you owned it, mind).
|
| The government, as soon as practical, can auction the
| stock it receives. Thus identifying its value and
| releasing the funds.
| TimTheTinker wrote:
| > You seem to be agreeing that this would be a fine
| system with those caveats.
|
| I'm not advocating anything in particular. I'm only
| pointing out some potentially serious issues with the
| proposed system.
|
| Sure, primary residence could be excluded. But that
| doesn't change anything about what I said, except perhaps
| blunt the initial impact on the middle class.
|
| > The government, as soon as practical, can auction the
| stock it receives. Thus identifying its value and
| releasing the funds.
|
| Perhaps that could be part of the tax law. I doubt it
| would stay that way... once the government _can_ own
| stocks and portions of real estate, I 'm sure it will
| seek to incrementally increase its benefit from doing so.
| I shudder to imagine politician-beaurocrats as the most
| powerful hedge fund managers of tomorrow.
| teachingassist wrote:
| > once the government can own stocks and portions of real
| estate, I'm sure it will seek to incrementally increase
| its benefit from doing so.
|
| There's nothing stopping the government from owning these
| things already (governments own plenty of real estate, in
| particular), so this seems like undue cynicism.
| TimTheTinker wrote:
| There's a big difference between agencies owning
| buildings within which to do business (or the BLM owning
| vast swaths of land for environmental preservation) and
| the IRS maintaining a real estate asset class.
|
| In fact there's almost no comparison to be made between
| the two.
| teachingassist wrote:
| Regarding the government's ownership of real estate, I
| suggest you are simply mistaken, e.g.:
|
| https://www.forbes.com/sites/bisnow/2017/04/11/solving-
| the-m...
| TimTheTinker wrote:
| That article is talking about local governments, not the
| federal government.
| koheripbal wrote:
| So the government would then be partial owner to your
| restaurant or mechanic shop? The government would then be
| partial owner to your catering business or flower store?
|
| I cannot think of a more complicated mess as the
| government being part-owner of half the small businesses
| in America.
| lupire wrote:
| It's called a lien, payable at liquidation, and it's a
| simple accounting object.
| bombcar wrote:
| This would be a very interesting way to handle percentage
| taxation on assets like that.
|
| Either pay %x in cash value or give %x percent of the
| item to the government.
|
| Of course likely the government would just want to
| liquidate immediately but you could perhaps set it up as
| a "lien" on the stock/bond/property that gets satisfied
| at final sale.
| jbay808 wrote:
| They'd want to liquidate as soon as possible, but they
| might have to wait for a liquidity event like an IPO to
| do so.
| SomewhatLikely wrote:
| I'm not sure the lien would really be any different than
| how capital gains taxes work today. Assuming you stayed
| in the same tax bracket every year.
| IncRnd wrote:
| No, you wouldn't. Unrealized gains being taxed would
| eventually make you declare bankruptcy or live on the
| street. The government wouldn't let you pay in stock but
| sell stock yourself.
| UnpossibleJim wrote:
| So, unless I miss what you're saying, is that you propose
| that the government own a share in every business that is
| created by way of "taxation". Is that not what you're
| proposing in this statement?
|
| Do they also get to leverage these shares to have a vote
| as to the business decisions, like any other share holder
| does? (assuming they have enough shares in this
| hypothetical share tax)
| ljf wrote:
| Not my idea, nor one I think is perfect, but I assume
| they are saying this would no be every company, just
| those where they would rather give shares than pay tax.
|
| No doubt they would be loads of ways to scam this though,
| setting up supposedly valuable companies to 'pay' a big
| tax bill, then rinse the company or allow it to fail
| while diverting profit elsewhere.
| UnpossibleJim wrote:
| I was just saying, it sounds an awful lot like forced
| communism through taxation. A share in a company is a
| portion and a vote in a company, however small.
| jbay808 wrote:
| I can't think of a way to scam it, as long as they only
| allow this method of payment for taxes assessed on the
| asset itself, rather than as a substitute method of
| payment for other taxes owed.
|
| It would be an interesting idea to explore and could
| potentially be a massive boon to risky startups by
| allowing them to hand out equity more freely as
| incentives without worrying about the accompanying tax
| burden.
| jbay808 wrote:
| The government is taxing you anyway. I'm not proposing a
| new tax, I'm proposing more flexibility on how they
| accept payment. Right now, they only accept the taxes to
| be remitted in dollars.
|
| For simple income tax, where you're _paid_ in dollars and
| hand the government a percentage, that 's fine.
|
| But what if you're paying a tax on, say, some equity you
| were given in a startup?
|
| This can cause huge trouble for people who have illiquid
| assets, like equity in a private company. You have to pay
| tax in dollars based on a _guess_ of the value of that
| equity, even though you can 't trade the equity for
| dollars (it's not liquid). When you eventually _can_ sell
| the asset, like at an IPO, its assessed value could have
| decreased and it might be worth even less than the taxes
| you already had to pay on it.
|
| That's the kind of gift you don't want to receive.
|
| I'm suggesting that, for those who are worried about that
| risk, the government allow you the _option_ of handing
| over a percentage of the asset instead. If it ends up
| being worthless paper, then the government gets nothing,
| but on the other hand that 's also the correct amount for
| them to get because the tax on $0 should also be $0.
|
| Most likely, the government would choose to (or perhaps
| by legislation could be compelled to) sell the asset at
| an IPO, but that's a detail. Perhaps they could also have
| an agency for managing and directing such assets in the
| public interest.
| HWR_14 wrote:
| A house's capital gains actually have special treatment.
| But in some states property values for taxes do rise by
| huge amounts.
| _archon_ wrote:
| In your house example. this is only if the homeowner takes
| out a loan against the new increased value of the house,
| and then pays tax on a portion of that loan. If your house
| appreciates and you don't play financial games with it, the
| only increase in costs would come from a local tax
| reassessment.
| taeric wrote:
| I think it is assumed a wealth tax would not require
| taking out a loan. You can assume that your home would be
| exempt, but more likely it will just be a standard
| allowance deductable.
|
| This isn't a new thing. Property taxes are the wealth tax
| that already exists, at large.
|
| That is... You're point on a tax reassessment is exactly
| what is being discussed. And if the tax on your wealth is
| increased as a form of capital wealth, expect the rates
| to be higher that most property taxes.
|
| Edit: I see I missed that this was a hypothetical on
| touching collateral. Not sure how I feel on that one. In
| large because I know so many folks are essentially
| tricked by marketing to refinance all the time.
| jmcqk6 wrote:
| >a massively valued asset that you can't sell
|
| In this case, the value is not well defined. If you don't
| have a market, you cannot determine the value. You may
| think it's extremely valuable, but if you have no one else
| willing to recognize that value, then it doesn't really
| exist.
| tyre wrote:
| The value is precisely defined by a 409a valuation.
| That's the price options are offered at (the strike
| price) and what the FMV is.
| 6gvONxR4sf7o wrote:
| Aren't 409a valuations famously gamed?
| ardit33 wrote:
| It is a bogus valuation... as it is not market based. If
| you can't sell the stock, and nobody wants to buy it,
| (yes, there are startups that are in this position), then
| that valuation is mostly wishful thinking. Often the
| valuation undervalues the company as well, but that's
| another story.
| lupire wrote:
| That's the value when the valuation happens, which can be
| years before exercise.
| rhino369 wrote:
| No different than me selling stock A, paying capital gains
| and then buying stock B, which could go to zero.
|
| You can handle your hypo the same way the tax system
| handles mine. You can deduct the capital loss from future
| gains.
| nilsbunger wrote:
| Sure it's different. You might not have cash to pay those
| taxes. When you sold and bought, you had an opportunity
| to set aside the $$ to pay taxes
| rhino369 wrote:
| If you are borrowing money, you have the opportunity to
| set that money aside to pay taxes. It's really no
| different.
| nilsbunger wrote:
| It's not easy to get a loan against illiquid assets in
| many cases. And even if you get a loan, if the asset goes
| to zero you still owe the loan balance, which could be
| huge compared to your normal finances. And you pay
| interest on that loan.
|
| It could work in some cases but I don't see how it's the
| same as selling stock A and buying stock B.
| PaulDavisThe1st wrote:
| You may never have future gains to match the loss.
|
| Why would we want a system that taxes people on an
| unrealized gain and then (maybe) gives it back to them
| over coming years?
| munk-a wrote:
| I think we'd want that tax income because a dollar today
| is more valuable than a dollar tomorrow - making sure we
| increase cash flow in the short term and stabilize
| expected cash flow allows us to more accurately set the
| budget.
| sangnoir wrote:
| > You may never have future gains to match the loss.
|
| _C 'est la vie_. That's how Capital Loss deductions,
| Electric Vehicle credits and other non-refundable tax
| credits _currently work_ : individuals may not have
| enough upside to maximize their benefits, That's just how
| the system works as it is impossible to balance
| everyone's competing scenarios. If you are eligible for a
| $7500 EV credit but only paid $3000 in taxes, you'll only
| get that $3000 back, and not the full $7500.
| pnutjam wrote:
| Most American's live in that system, it's called being an
| employee...
| [deleted]
| mcguire wrote:
| Or, perhaps, stop accepting payment that may be valueless
| when you try to access it. And stop trying to get paid in a
| way that hides your income from the tax system.
| enriquto wrote:
| > I agree that a wealth tax is not the way to go.
|
| Why not? A tax on wealth, even a small one, is the only
| mechanism to avoid a long-term drift towards a feudal-like
| state of society.
| Spooky23 wrote:
| Exactly. The strategic problem here is that the changes
| that took place in the Vietnam era and 80s ultimately
| creates a concentration of capital and power that is beyond
| anything we've seen since Roman times.
|
| In the mid-term we're looking at some sort of weird hybrid
| plutocrat/government hybrid with an American flavor and a
| Chinese flavor. Everyone else is in the middle with the
| scraps.
| hitpointdrew wrote:
| Because they don't work. Many EU countries have attempted
| them and they have all failed. There are a host of issues
| with wealth taxes, one of which is simply placing value on
| illiquid assets is difficult. How much is that rare art
| price worth? Well no one knows until you put it on the
| market. Then there are issues with immaterial things like
| rights, that would be very tricky to value. What if you had
| the rights to all of Bill Cosby's recorded stand-up acts?
| That could have been valued highly before the rape
| convictions, now it is essentially worthless. A wealth tax
| would just create a battle of litigation between the
| wealthy and IRS, and the wealthy would win. The real
| solution is to just have a VAT like every other developed
| nation in the world, is the only way to get slice of the
| pie from the wealthy.
| eecc wrote:
| The Dutch (notoriously not the most Socialist of the lot)
| tax office assumes that any wealth above a certain
| "pocket money" stash, your first house and lifelong
| savings (money you effectively lock out of your reach
| until you reach pension) are invested and therefore taxed
| at ~20% on the assumed ~2% ROI.
|
| Seems roughly fair
| HWR_14 wrote:
| How do you separate wealth building from consumption? If
| you buy 10 art pieces that could be an investment or an
| aesthetic/decorating choice. If you buy a TV it's almost
| certainly going to be worth nothing in a a few years.
| plmu wrote:
| Most European countries, including Switzerland, still
| have them. They do work with some limits. And they are
| absolutely necessary to prevent that, once you have made
| money, you can profit for the rest of your life including
| future generations.
|
| If there is no form of weath + inheritance tax, a feudal
| society is unavoidable.
|
| Even if difficult, we'd better try.
| imtringued wrote:
| I don't see the problem. As long as there is 2% inflation
| that wealth needs to be put to work in a way that ends up
| employing someone, therefore the employee benefits from
| the existence of the wealth that someone else carried
| hundreds of years into the future.
| ac29 wrote:
| > As long as there is 2% inflation that wealth needs to
| be put to work in a way that ends up employing someone
|
| What exactly do you mean by this? Holding wealth in bars
| of gold doesnt need to employee anyone (if you have
| enough of them, you might want security personnel, but
| you could also just own a Gold ETF or something).
| slg wrote:
| Many of these things are already valued, including some
| by the government such as lot of real estate. We can work
| to use those valuations. We can make it so insurance
| companies need to report valuations to the government for
| example. A painting worth 7 figures is going to be listed
| in some insurance policy. Report that number to the
| government and there is no legal argument to be had.
| Either it is being overvalued for insurance fraud
| purposes or undervalued for tax fraud purposes. The
| conflicting incentives should yield a relatively accurate
| valuation.
|
| We also don't need to make perfect the enemy of the good.
| We don't need to account for absolutely every piece of
| wealth if we cover the big ones. We can also continue to
| revise these tax policies as new loopholes are discovered
| and exploited.
| tannhauser23 wrote:
| "there is no legal argument to be had"
|
| Oh bless your heart.
| slg wrote:
| Arguing that one valuation is too low/high is and
| admission that the valuation is wrong and you are
| therefore open to accusations of fraud. So maybe "no
| legal argument" is an oversimplification, but no
| reasonable legal argument can be made without an
| admission that the other party needs to update their
| valuation in their benefit.
| pinky1417 wrote:
| Perfect *is* the enemy of the good here.
|
| Major components of the economy are not valued regularly,
| e.g. private businesses. Sure, if a buyer paid $10MM last
| week for a private business, we might say it's worth
| $10MM today. But what about a business that was started
| from scratch by the founder? Or one that was last sold 30
| years ago? Or one in a very niche industry?
|
| Put simply, valuation is not only a science, but an
| art... and it's an expensive art. The cost and difficulty
| of administration alone would be reason enough to steer
| clear of a wealth tax.
|
| Lastly, although I'm not a fan of higher taxes on anyone,
| even simply a more progressive income tax would make more
| sense than a wealth tax.
| pnutjam wrote:
| Question? How do you feel about healthcare? Why is this
| the one place we should follow the rest of the world,
| wealth tax / VAT?
|
| One might suspect the wealthy are just dropping turds in
| the punchbowl.
| ekelsen wrote:
| It's not that hard to find a price for a rare art piece,
| or almost any other asset.
|
| Make the owner declare its value, tax it at the value.
| But anyone can buy it at that price. If they want to keep
| it, they'll need to value it correctly, and thus it will
| get taxed correctly.
| chmod600 wrote:
| Interesting idea, but a fundamental aspect of private
| property is that you don't have to sell it.
|
| Maybe someone knocks on your door and says "I just bought
| your house. Get out." That would be pretty unpleasant.
|
| Or, more on topic for this site: maybe they do that with
| your startup.
| ccn0p wrote:
| this would effectively auction off everything you own.
| What if an original piece of art is priceless to you?
| Where does it end?
| NullPrefix wrote:
| If it is actually priceless, then you should not be able
| to hog it for yourself. /s
| sokoloff wrote:
| Can you imagine the day that you declare a value on your
| house and the following week someone much richer than you
| comes along and tells you to "beat it; I just bought this
| place!"
| ekelsen wrote:
| One can imagine reasonable policies around things like
| housing, my original two line reply was not meant to
| detail all the ways this would for all types of assets.
|
| I don't think anyone would have much of a problem with
| the simplistic scheme applied to rare art though.
| sokoloff wrote:
| I do have a problem with that. I would prefer the Mona
| Lisa to remain in the hands of the Louvre than be
| regularly auctioned off. I would prefer American Gothic
| to remain in the hands of the Art Institute of Chicago,
| etc.
| ekelsen wrote:
| Try to imagine a reasonable policy rather than assume the
| worst possible policy and then the outcomes that follow.
|
| One can imagine that public charities or government
| assets for example are exempt from such a scheme (since
| they don't pay tax anyway usually).
| sokoloff wrote:
| I'm trying to imagine the reasonably predictable response
| to the policy that you sketched out. Removing private
| property rights is not a casual undertaking I agree and
| would require substantial thought and care, perhaps too
| much to be practically workable.
| ekelsen wrote:
| Your replies so far don't seem to indicate you gave much
| thought to how such a system would reasonably work -- as
| evidenced by the assumption that art owned by charities
| or governments (institutions which don't pay tax) would
| also be up for auction.
| sokoloff wrote:
| You likewise don't appear to have given a ton of thought
| to the logical responses that would likely occur from
| your proposal.
|
| How long until some rich art collector starts a charity
| to hold their art and protect it from being auctioned?
| ekelsen wrote:
| There are already laws that would make such abuse
| illegal. Abuse of charities is not a new problem.
|
| I'm not a lawyer - but it seems like one obvious factor
| would take into account where the artwork purchased by
| the charity resides. Is it in a private residence? A
| freeport? Probably not really a charity.
|
| Is it hanging on the wall in the Art Institute of
| Chicago? Might be fine.
|
| Then the question is what happens if the charity tries to
| sell it back to a private collector at some future point.
| Might be allowed as long as back taxes are paid assuming
| some appreciation schedule.
|
| I think the more general point is that policy is _hard_,
| and to assume that something doesn't work because you've
| thought about it for 2.5 seconds is probably a bad
| assumption to make. Most of our existing laws/policies
| would be similarly easy to attack if distilled to one
| sentence. There's a reason actual policy and laws are
| really long.
| lovecg wrote:
| Would do wonders for the Bay Area housing market! On a
| serious note, this proposal was originally coupled with a
| pretty radical (from our point of view) approach to land
| ownership. Land is closer to zero-sum than many other
| things (ignoring artificial islands etc.), so this forces
| a more efficient pricing/land use at the expense of doing
| away with private property rights for land.
| sokoloff wrote:
| Worried that a competitor is catching up or threatening
| your market? Use your cash reserves to buy their factory
| out from under them. Don't bother competing with Tesla,
| just make sure they can't keep going once they get a
| little traction.
| ekelsen wrote:
| Imagine a reasonable policy rather than simplistic worst
| possible policy strawman. There are already many many
| laws that prevent abusive transactions in the current
| system, there's no reason that there wouldn't need to be
| similar laws to prevent abuse here either.
| tornato7 wrote:
| This is called a Harberger tax and there has been
| extensive research on it: https://chicagounbound.uchicago
| .edu/cgi/viewcontent.cgi?arti...
| cableshaft wrote:
| This a worse idea than the Jump to Conclusions mat.
|
| I have to choose a price for all of my assets and then
| anyone could just be like 'yeah, I'll buy at that price'
| and take it from me? What if I bought the assets for the
| hope of it maybe being worth something in 5-10 years? Do
| I prematurely announce 'yeah, it's worth the price in
| 5-10 years that I _hope_ it will be ', and pay an
| enormous tax on something that's not a guarantee it will
| ever go to that price, just to keep other people from
| buying it from me if I announced what the market value is
| now? (And also I'm not allowed to keep any assets at
| market value unless I announce it's worth more to me?)
|
| Ugh. Never get in a position where you could feasibly
| propose this in government, please.
| ekelsen wrote:
| Your reply could have been written to be a lot less
| insulting and assume I'm aware of policy implications of
| this proposal but did not choose delve into 150 years of
| research in a two line reply on HN.
|
| I wasn't proposing that this become policy for all
| assets. Would it allow you to accurately assess the price
| of rare high valued art for the purposes of a wealth tax
| -- yes. It would also allow you to value other assets as
| well, but there are drawbacks.
|
| I don't think your example of speculation is particularly
| good example of a drawback though. If you need to set the
| price at X so that someone doesn't buy it from you now,
| then that means its value is indeed just below X
| (assuming you've set X correctly).
|
| If you're the only person in the world you thinks that
| the value of your asset will be 10X in 10 years, then you
| can safely set the value at X now and nobody will buy it
| from you. If you aren't the only person in the world who
| thinks this and someone is willing to buy it from you now
| for 2X, then I guess the value of the asset right now is
| 2X.
| yupper32 wrote:
| It's a completely ridiculous policy that would require
| enumerating every item in history and deciding if people
| are able to buy it from you.
|
| My fridge? My dog? My shoes? My car? My bike? My boat? My
| model railroad set? My grandmothers ashes? My underwear?
| Oops I accidentally undervalued my gaming computer on my
| taxes and now people are knocking on my door.
|
| You'd end up with a document 3 million pages long and
| vengeful neighbors and exes buying each others items to
| fuck with each other. You're calling it a strawman
| argument, but these are actual things that would have to
| be addressed.
|
| No amount of "delving into 150 years of research" gets
| around all the massive, massive holes in your ridiculous
| idea.
| ekelsen wrote:
| When you come up with a problem (in seconds) with a
| policy (especially one described in essentially one
| line), ask yourself, what reasonable change could I make
| to the original idea to make it more reasonable.
|
| For example, you could easily say that only assets that
| would be declared as having a value over X amount need to
| be declared in this way. Choose X to be somewhere in the
| neighborhood of a house, and you would get almost all the
| value of such a policy without any of the drawbacks you
| just listed.
| yupper32 wrote:
| You still have a massive massive number of loop-holes to
| fill and complexities to answer for.
|
| Does my collection of rare coins count as one asset as a
| whole, or individual assets that are each under X amount?
| Who decides what my random painting is worth so I know if
| I have to declare it? What happens when my asset
| depreciates?
|
| Also, once you go to X being "somewhere in the
| neighborhood of a house" you lose a TON of taxable income
| with this policy to the point where it's probably not
| worth it. You're not going to gain much money taxing a
| few mega-yachts and rare paintings, especially when you
| have to include the money spent dealing with more
| complicated taxes and audits.
|
| We can just raise income and capital gains taxes instead
| and it's a whole lot easier. Wealth taxes that include
| assets are so fragile and complicated.
| ekelsen wrote:
| The purpose of a wealth tax is (mostly) not to raise
| revenue, it is to provide a downward pressure on the
| wealth of the wealthiest individuals.
|
| I also think you're making a poor estimate of what the
| distribution of wealth looks like. Yes, there are lots of
| small items, but the vast majority of wealth is stored in
| items/things/land/etc. of significant value. Perhaps more
| than anything it is stored as equity in companies. For
| income taxes the top 1 percent paid a greater share of
| individual income taxes (38.5 percent) than the bottom 90
| percent combined (29.9 percent). For wealth the
| distribution is even more skewed.
|
| I agree there are a lot of things to figure out. That was
| and is true of our current system too. At one point the
| rules for all its loop-holes didn't exist and they had to
| be created and that didn't happen overnight.
|
| If your asset depreciates, then you say its worth less
| next year. You decide what your random painting is worth.
| If you don't report an asset that should be reported, I
| can see multiple mechanisms:
|
| (1) You sell it for more than X. At this point it becomes
| clear it should have been reported and back taxes are
| owed. (2) You bought it for X. If you don't report,
| questions would be asked. (3) There is no record of
| purchase and you never sell it. You might avoid paying
| taxes. I'm not sure what assets of significant value
| (over $500K) would fall into this category.
|
| I don't have a great answer completely off the cuff about
| how to deal with things like a collection of rare coins.
| Perhaps the best answer is the easiest answer: they are
| just treated separately.
| yupper32 wrote:
| > The purpose of a wealth tax is (mostly) not to raise
| revenue, it is to provide a downward pressure on the
| wealth of the wealthiest individuals.
|
| Sorry, what? Taxes should always be about raising money
| for various projects that benefit the country. If we
| can't see eye-to-eye on that I don't think we'll find
| common ground here. I'm not looking to punish rich people
| for being too rich. I'm looking to fund public projects
| like healthcare, infrastructure, and education.
| cableshaft wrote:
| It sounds ridiculous on the face of it to me (one
| exception: in board games. There's something similar in
| board games like Isle of Skye where you set a price for
| tiles that you must pay if other players don't buy them
| from you, but that's just a 45 minute board game for
| victory points, not real physical assets)
|
| But I'm willing to read more about the idea, if you have
| an article or two that makes a good case for your
| proposal, please post and I'll give it a look.
|
| I saw in another comment someone called it the Harberger
| tax, and linked to a 66 page paper that I'm just not
| going to read for the sake of an internet post.
|
| I could have been less antagonistic in my reply, I
| apologize for that.
|
| I do think you're overestimating how well people can
| judge, individually, what something is worth accurately
| on declaration, both now and in the future, especially if
| it's an asset they don't ever want to part with.
|
| But again, I'd be happy to read articles from experts
| that make a case for this.
| ekelsen wrote:
| A decent intro is the first chapter of Radical Markets,
| available here:
| http://assets.press.princeton.edu/chapters/s11222.pdf but
| it also isn't short.
|
| Also a video here:
| https://www.youtube.com/watch?v=uj186urDU8c
|
| Neither of these is particularly short and still don't
| address all (or even many) of the practical issues. As
| with most real policy and law, I don't think something
| can be both short and cover all the real world cases.
| There's unfortunately a reason most laws are really long.
|
| I believe the chapter of the book addresses the issue of
| how will people know what values to set. In addition to
| the solution proposed in the book, another alternative
| (of mine), is to allow people to pay some amount of
| retroactive tax. Let's say someone tries to buy the asset
| from you for your set price, but you don't want to sell.
| You can raise the price to some amount the buyer no
| longer wants to pay, but since you were underpaying taxes
| on the asset, you need to make them up.
|
| Would such a proposal probably mean people set lower
| prices than are correct -- yes; would it still make sense
| for things like homes -- yes.
| cableshaft wrote:
| I'll at least check out the video. I can put that on in
| the background while I'm doing dishes later. Thanks for
| the links.
|
| Also specifically for houses, at what point are you
| expected to make such a declaration? You don't really own
| the house until you've completely paid off the mortgage
| on it. Until then it really belongs to the bank or
| mortgage lender. So does that mean you're free to not
| make such a declaration until your 30 year mortgage is
| up? And what if you take out a second mortgage on the
| property during that time?
| ekelsen wrote:
| We're designing the system, so I think we can choose what
| makes the most sense. I think regardless of whether or
| not you have taken out a loan (collateralized or not),
| you would still need to declare a value right away.
|
| In a case where you have a collateralized loan to
| purchase the asset, I imagine the lender could require
| the value you set to be at least the value left on the
| loan. (But the lender probably shouldn't be allowed to
| set the value beyond that stipulation.)
|
| I also want to say that I definitely do not have all the
| answers for all the possible policy issues that might or
| will come up. I enjoy trying to think them through, so
| the first attempt might have problems and the cycle of
| finding those problems and fixing them will eventually
| lead to something that hopefully works well.
| wing-_-nuts wrote:
| Your overall point is right, a wealth tax would be
| massively complex. In all honesty it's probably only
| worth implementing on billionaires (and using some of the
| funds raised for beefing up the IRS legal team and
| auditors).
|
| One thing I want to point out, the reason why 'wealth
| taxes have always failed' is because it's against the
| interests of the wealthy, and the wealthy are _powerful_.
| Look how scared republicans are of grover norquist and
| the billionaires that back him. It 's hard not to argue
| the same thing is happening in the EU as well.
| dexterdog wrote:
| How do you even implement in on "only billionaires?"
| Wouldn't everybody need to doc their wealth to prove that
| they are not a billionaire?
| wing-_-nuts wrote:
| Billionaires are largely majority shareholders in
| corporations. I'd say that's a fine place to look. Maybe
| the IRS can look at the assets of anyone who's suspected
| to be worth 750M or more. Again, as I said, you could
| fund better enforcement of this by funding an IRS task
| force who's job it is to find and tax them. I can't
| believe something so simple as 'billionaires should pay
| more than 23% (or whatever it is) taxes are
| controversial, but here we are.
|
| I especially love how the Koch brothers effectively
| funded an astroturf campaign that hijacked the republican
| party, to get blue collar folks to argue against taxes on
| the 1%. That is some rich irony.
| dexterdog wrote:
| Nobody is saying they shouldn't pay taxes. People are
| saying they shouldn't be taxed on their wealth partially
| because anybody with an inkling of historic knowledge
| knows that a wealth tax will be coming to the masses
| shortly thereafter. Taxes are already far too
| complicated.
| kristjansson wrote:
| We have a small tax on the wealth of the rich, called the
| estate tax. It's assessed when the owner will feel the pain
| the least.
| dexterdog wrote:
| And we have piles of loopholes that make it effectively
| only a tax on the stupid rich.
| MR4D wrote:
| Your argument doesn't seem to agree with the evidence.
|
| Feudal economies were actually powered by wealth taxes. So
| putting in a wealth tax won't do anything to avoid it
| becoming a feudal society. Further, confiscatory taxes[0]
| (of which wealth taxes are but one type) are favored by
| dictatorial regimes throughout history. I don't think we
| want to go down that road.
|
| Wikipedia has a great summary on feudal taxes[1], and they
| are based on wealth (usually land and hides). It's actually
| a pretty good summary of a long period of time, and a
| complex topic to begin with.
|
| [0] - https://www.merriam-webster.com/dictionary/confiscate
| [1] -
| https://en.wikipedia.org/wiki/Taxation_in_medieval_England
| eecc wrote:
| And the Decima (10%) to the Church, and another to the
| Landlord for the rent of their lands.
|
| So please let's not hot-take it to the extreme
| tryptophan wrote:
| >feudal-like state of society
|
| Do you have a source for this? People keep repeating this
| over and over, but I have never seen a shred of evidence
| for it. It seems some people have just decided that they
| hate inheritance and thats just it, no evidence required.
|
| I would encourage you to look at the most unequal countries
| in the world by wealth. You may find it surprising that
| none of them are "feudal".
|
| https://en.wikipedia.org/wiki/List_of_countries_by_wealth_i
| n...
|
| Edit: I don't mean to be snarky, apologies if it comes off
| that way. Unfounded ideas just bother me, and I would love
| to gain new perspective forming info.
| scottLobster wrote:
| He said "feudal-like". One of the key aspects of feudal
| society is an aristocratic elite that controls almost all
| the property and rents it out to the rest of the
| population.
|
| Take a look at the current housing market craze where
| wealthy/institutional buyers are taking advantage of low
| interest rates to buy properties with all-cash,
| inspection-waived offers above asking price, in some
| cases whole neighborhoods at a time, so as to rent them
| out. This is a privilege unavailable even to the upper
| middle class, and could very well turn into a sort of
| neo-feudalism if left unchecked.
|
| It's also not unprecedented for companies to own entire
| towns and pay employees in company "scrip" that was only
| redeemable at company stores, a practice which lasted
| well into the 1950s and (after some googling) apparently
| was tried by the Mexican subsidiary of Walmart as
| recently as 2008.
|
| Looking at the broader state of the economy, wages have
| been stagnant for decades; property, healthcare &
| childcare (at least in the US) and education are more
| expensive than ever. With the exception of food,
| everything that matters in life is more unattainable for
| the average person, and everything that doesn't matter is
| super-cheap, with no signs of those trends reversing. How
| does that not turn into a form of neo-feudalism if left
| unchecked?
|
| The last time we "checked" it (in the US) it took decades
| of labor protests/riots that often turned bloody and the
| effects of a couple of world wars. Historically plagues
| (that actually kill a lot of people indiscriminately) and
| wars are just about the only re-distributive methods that
| have proven successful in the long term. Unless we want a
| repeat of some real nasty history, we need a historically
| unprecedented way to redistribute wealth.
| smileysteve wrote:
| The most politically tenable way to end long term unrealized
| gains is
|
| 1. drop the corporate tax rate to 0%. Most notably, these
| corporations would follow the REIT tax policy that requires
| them to distribute > 90% of taxable income to shareholders.
|
| 2. Move Social Security and Medicare into the Progressive
| Income Tax (it being flat on income is regressive)
|
| 3. Offset #1 and #2 with a higher income tax (especially for
| capital gains)
| HWR_14 wrote:
| For (1) You can set up pass thru entities that pay 0% tax
| and distribute 100% of their profits. The income is then
| taxed as regular income by the shareholders.
| eloff wrote:
| > The big takeaway I got from the article missing in your
| summary is that the wealthy take loans secured by unrealized
| gains in order to finance their lifestyle.
|
| Which they have to pay back with post tax money. I don't see
| a problem here. At best this is tax deferral until capital
| gains are realized, something we allow for good reason -
| paying real money to cover tax on paper gains (which could
| vanish) is a problem, and could even force you into giving
| away an illiquid asset because you can't afford the tax on
| it.
|
| They're gambling their stock will perform better than the
| interest rate on the loan. That's a reasonable gamble.
|
| Taxing a loan seems silly.
| robotresearcher wrote:
| > Which they have to pay back with post tax money
|
| Unless they die first. If heirs hold on to inherited
| property for a while (2 years?) they can sell it at the
| cost basis reset to the value at the time they inherited.
| They pay back the loan with the before-death gains untaxed.
| The original buyer got to effectively realize their gains
| via loans, untaxed.
|
| https://smartasset.com/taxes/how-to-avoid-paying-capital-
| gai...
| xhkkffbf wrote:
| Yes... and it's important to remember that unrealized stock
| gains aren't really wealth either. It's not like Bezos can go
| out and buy 100 billion things from the McDonald's dollar menu.
| The money is locked up in the shares and he has so many that
| any attempt to sell more than a few could really depress the
| price of the stock.
|
| If anything, he's sort of a curator of the wealth for everyone
| in the Amazon world. Yes, he's able to live very well, but the
| simple value of his unsold shares doesn't capture his true
| ability to buy things.
| boatsie wrote:
| The article explains this, they use those unrealized gains as
| collateral for loans--bypassing the need to pay capital gains
| by actually selling the shares.
| abstractbarista wrote:
| How do they pay back those loans? I've never understood
| that part.
| xhkkffbf wrote:
| Presumably they sell stock, but any money works. It's all
| a gamble. If the stock tanks -- and they often do-- then
| it's easy to end up in bankruptcy.
|
| But this article is all about hating on the rich and
| imagining that it's all perfect for them. They don't want
| to talk about the times when the stock falls and the once
| rich turn into very poor.
| triceratops wrote:
| > the times when the stock falls
|
| Remind me when that's ever been allowed to happen in the
| past 10 years. At the first sign of any market trouble,
| the default Fed response is OMO and cutting interest
| rates to shore up the markets. Stock prices can never
| fall even if the actual economy is in the shitter.
| hnmullany wrote:
| Other countries have a time limit for how long you're allowed
| to sit on unrealized gains. In Ireland, for example, you have
| to pay capital gains on unrealized gains at the 7 year mark.
| hackeraccount wrote:
| How does that work for housing? Or is there some exception
| there?
| leroman wrote:
| > Unfortunately instead, the author spends much more time on
| point 1, conflating wealth with income, and avoiding the
| obvious argument that capital gains are eventually taxed - the
| rich are not escaping that.
|
| Isn't it the point that wealth creates more wealth? and the
| more you have the more you can make? thus not paying taxes
| leaves you with more to play with?
| sudhirj wrote:
| No, the more wealth doesn't mean the "more you can make". A
| majority of people own homes, for instance. And these homes
| usually go up in value. But no tax authority comes to your
| house and starts taxing you on how much the value of your
| home has increased. You pay taxes on the profits when you
| sell your home, not when you sit in it. Same thing goes for
| shares in companies. In both cases, the home and shares,
| owning something that has increased in value doesn't mean you
| have a stack of cash in your hand. You might once you sell
| your assets, at which point you pay taxes in both cases.
| leroman wrote:
| This doesn't make sense to me, people take loans to make
| more money via starting a business or other ventures, loans
| cost a lot of money, so just having capital to loan out etc
| makes you money.. Money creates more money so the more you
| have the more you can make in a proportional way. No?
| edgi wrote:
| Real estate tax is literally a tax you pay to the authority
| that "comes to your house and starts taxing you on how much
| the value of your home has increased".
| hnburnsy wrote:
| Just to be precise, aren't the taxes approved by the
| taxing authority allocated proportionally based on the
| total value of the real estate in the jurisdiction? In
| other words if all real estate values go up, your taxes
| should remaing constant?
|
| Maybe in different parts of the US this varies, but
| should the taxing authorities get more money because the
| real estate market is hot and do they take less when real
| estate values are down?
| thechao wrote:
| What!? I _absolutely_ pay a rolling cost in the increase in
| value in my home -- to the tune of 3.1% of its expected
| value, every year.
| sudhirj wrote:
| That's a property tax, not quite the same thing. You'd
| still pay it even if the home didn't increase in value,
| and you'd still pay it even if the home decreased in
| value, right? Isn't that more a local infrastructure
| bill?
| brewdad wrote:
| The property tax is based on the value of the home. If
| your home loses value, your property tax goes down, all
| other things being equal. Increasing home values increase
| your property tax bill.
| magicalhippo wrote:
| Here the property tax is a function of the estimated
| marked value of the property.
|
| Especially fun for old people living off their pension in
| their family home with large, attractive gardens in areas
| which were way outside town but now, some 50-60 years
| later, has become highly attractive...
|
| https://www.oslo.kommune.no/skatt-og-naring/skatt-og-
| avgift/...
| [deleted]
| splithalf wrote:
| If those foundations can do more good for humanity with less
| money than the federal system, wouldn't it be good to leave
| these "loopholes" in place?
| doopy1 wrote:
| Are foundations available to folks on a tech salary as a
| similar tool?
| boringg wrote:
| I feel like this article does 4 things: 1. Foment rage at the
| inequalities of the tax system (very easy to do) through their
| simple narrative 2. Flag to wealthy people who are paying their
| fair share to look at how to further improve their tax
| efficiency. 3. Create political damage (which seem to lean
| democratic) to the individuals who are doing everything
| legally?
|
| It seems like ProPublica is trying to continue to lay the
| groundwork for a wealthtax campaign by fomenting further rage
| around the inequalities of US tax system.
|
| Aside from that I have deep concerns about the source of this
| information and why it was used. Seems like IRS taxes have been
| weaponized and are readily available. Everyone should be deeply
| concerned about how ProPublica got this information.
| hogFeast wrote:
| The rich usually are escaping capital gains tax. There are a
| very large number of ways to avoid realising capital gains. A
| good example of this is John Malone...he has spent about two
| decades continuously trading assets up to $8bn, I would be
| surprised if he has ever actually paid capital gains.
| foerbert wrote:
| The problems faced at a certain level of wealth are so alien
| that it's not uncommon for their solutions to sound totally
| nonsensical - even actively harmful - to anybody outside of
| that demographic.
|
| In light of this, I don't think we can so easily dismiss
| delayed taxation of capital gains as unimportant and
| irrelevant. Maybe it is, but I think we need more information
| to solidly come to that conclusion. Even one of the things you
| (rightly, I think) identify as a problem seems to have some
| serious synergy with such a delay. What happens if one of these
| charitable foundations ends up with stock? How long of a delay
| might that taxation have then? And is there any way for them to
| get some liquidity out of that stock without actually selling
| it? Can they take out loans with it as collateral, for example?
|
| I'm not actively making claims here, but rather trying to show
| the situation is complex enough that we can't write off
| seemingly innocuous mechanics simply because they appear
| innocuous. It's complex, and weird, and needs deeper
| information and data to really understand.
| cableshaft wrote:
| He said delay, but that's just because the stock hasn't sold
| yet. Until you do, the gains are unrealized, i.e. the stock
| could drop precipitously suddenly due to some black swan
| event (i.e. a pandemic), and then they suddenly that wealth
| may as well never have existed.
|
| Like let's say I'm some regular guy, but I put my only $1000
| in some asset that appreciated 100x, and it's now "worth"
| $100,000. These people that want to tax unrealized gains
| swoop in and go "hey, you're 'worth' $100k on Dec 31, you
| should pay us $30k in taxes this year". And so I don't have
| that money and have to sell my stock to pay it, but two days
| before I do the stock market tanks before I get a chance to
| sell and it's dropped 70% in price, so now I'm 'worth' 30k.
| And now I've sold it all just to pay the unrealized gains
| tax.
|
| Now this is an extreme example and unlikely to happen exactly
| in the stock world, although not terribly extreme if this
| weren't stocks we're talking about, but some cryptocurrency.
|
| This is why taxing unrealized gains never made much sense to
| me. The gains aren't actually real until you've converted
| them into something else or you purchase goods or services
| with. Until then it's just some number on a scoreboard.
| auspex wrote:
| This is also why I think it's crazy we pay taxes on startup
| options when exercised. There's not market to liquidate to
| pay those taxes and the end value is very likely $0
| elliekelly wrote:
| You can borrow against the gains though so they aren't
| exactly unrealized gains either.
| cableshaft wrote:
| Yeah, borrow as in you have to pay it all back plus an
| extra percentage. It might be a lower percentage than
| capital gains, but you better hope the asset keeps
| appreciating at more than you borrowed + percentage.
|
| And then once you pay it back you still have to
| eventually cash out and pay capital gains tax anyway.
|
| Like if I had done that with bitcoin a couple of months
| ago (and it's possible to do, there's DeFi now), I would
| have been in some deep shit with the 50% drop recently.
|
| It does seem like a bit of a sidestep though, and I'm
| sure rich people are probably taking advantage of it, so
| I wouldn't be opposed to some sort of small tax on money
| gained from loans made against your assets assuming you
| owned enough of them (like I don't want to hurt small
| business loans or anyone in the middle class from it), to
| discourage this practice a bit.
| noobermin wrote:
| Why is a wealth tax not a good idea? Seems like it is the right
| idea.
| hackeraccount wrote:
| Wealth taxes in practice tend to make income taxes look
| simple - to be effective they need to be capricious and
| arbitrary in way that's difficult to sustain in a country
| with a legal system that at least makes a reasonable show of
| not liking either of those two things.
| boringg wrote:
| The source of how they got the tax returns is the story - very
| unsettling that the IRS had a security breach (either leak or
| hacked). I suspect SolarWinds has a part in this
| KingOfCoders wrote:
| Funnily made that point three days ago here
|
| https://news.ycombinator.com/item?id=27404513
| HWR_14 wrote:
| Due to the step-up-basis law, the government does not collect
| any capital gains not realized prior to death. So if you make
| 10 million in capital gains on a lucky early stage $5,000
| investment, and die without any other assets, the (US federal)
| government will collect zero in taxes from you, your estate or
| your heirs.
| elliekelly wrote:
| Point #3 has come to the (wealthy) masses via the "directed
| trust" which allows you to "donate" your money and take the
| write-off without actually _donating_ it yet. It's only just a
| bit more than a promise of eventual future donation.
| ffggvv wrote:
| i don't see the issue with the charity thing as long as the
| money is actually used for charity
|
| i would trust the gates foundation to use money 1 million more
| wisely than the government just wasting it
| phekunde wrote:
| Add to that list:
|
| 4. Divorces are being initiated to show expenses and "reduce"
| wealth ;)
| alok-g wrote:
| Unless the tax brackets go down, net taxes (spouses combined)
| should come to roughly the same thing.
| yupper32 wrote:
| It's very possible to pay more taxes while married. Two
| high income people getting married will very often face a
| large "marriage penalty".
|
| It's the dumbest thing I've ever heard of when I first
| looked into taxes when thinking about getting married. We
| seriously thought about not getting married on paper
| because of it.
| pinkfairy10 wrote:
| Capital gains are not eventually taxed if you hold the stock
| until you pass them get the step up in cost basis. Easier to do
| if you can borrow cheaply and deduct the interest.
| danso wrote:
| > _It 's everything we've already known._
|
| > _A more interesting question is how did ProPublica get a copy
| of Jeff Bezos ' tax returns. Seems like a leak at the IRS?_
|
| Yes the actual tax records are what make the story interesting,
| even if the data only confirms what "everyone knows" -- at
| least there's actual data and empirical analysis of the scope.
|
| According to this accompanying explainer, the leak is
| anonymous:
|
| https://www.propublica.org/article/why-we-are-publishing-the...
|
| > _A second question certain to arise is the motives and
| identity of the source who has provided this data to
| ProPublica. We live in an age in which people with access to
| information can copy it with the click of a mouse and transmit
| it in a variety of ways to news organizations. Many years ago,
| ProPublica and other news organizations set up secure systems
| that allow whistleblowers to transmit information to us without
| revealing their identity._
|
| > _We do not know the identity of our source. We did not
| solicit the information they sent us. The source says they were
| motivated by our previous coverage of issues surrounding the
| IRS and tax enforcement, but we do not know for certain that is
| true. We have considered the possibility that information we
| have received could have come from a state actor hostile to
| American interests. In particular, a number of government
| agencies were compromised last year by what the U.S. has said
| were Russian hackers who exploited vulnerabilities in software
| sold by SolarWinds, a Texas-based information technology
| company. We do note, however, that the Treasury Department's
| inspector general for tax administration wrote in December
| that, "At this time, there is no evidence that any taxpayer
| information was exposed" in the SolarWinds hack._
| godshatter wrote:
| I would be outraged if someone leaked my taxes to the public.
| I'd be looking for someone to sue, though in this case I'd
| fail to find anyone I can sue I'm sure. I don't care if these
| are the richest people in the country or if the data is
| really interesting, it's not ethical. In my opinion, even
| though propublica didn't solicit this information, they
| should not have posted information derived from private tax
| information without the consent of those involved. I don't
| what the laws are here, but I'm talking about ethics. I
| wouldn't want my private information summarized, by name, in
| this manner.
|
| The other issue I have is that not only is the provenance of
| this data unknown, so also is it's veracity. They don't know
| who gave it to them or why and thus they can't confirm it
| wasn't made up out of whole cloth.
| secabeen wrote:
| I actually feel the opposite. I think we should make tax
| returns public, as they do in Norway:
| https://www.theguardian.com/money/blog/2016/apr/11/when-
| it-c...
|
| We'd need some small adjustments to make them not useful
| for identity theft (remove SSNs, stop using specific values
| from them as authenticators for the IRS, etc.) but with
| that done, I think it would be a great improvement in
| transparency.
|
| My public sector salary is already a matter of public
| record, and that has worked fine.
| godshatter wrote:
| Someone's public sector salary may be a matter of public
| record, but their deductions are not. The tax forms (in
| the US, anyway) cover everything from whether or not they
| or their spouse are blind to exactly how much they spent
| in health care costs from a health spending account (with
| receipts attached) to whether or not they added solar
| power to their roof. It would have to not show addresses,
| because of people hiding from abusive spouses, among
| other concerns.
|
| I'm for more aggregate data being made available as long
| as it couldn't be used to find one individual, and I'm
| okay with the IRS adding a checkbox for "make my data
| publicly available" as long as you could always uncheck
| it. But then I take privacy more seriously than many
| others do, not sure why.
|
| I'd be happier if we greatly simplified the tax laws so
| that this extra data was not necessary. Not going to
| complain if they reduce the tax burden as well.
|
| Edit: grammar
| koheripbal wrote:
| I don't think it's any coincidence that Jeff Bezos
| specifically was leaked.
|
| He has been straying into politics in DC very very heavily,
| and it looks like he's making enemies. I suspect that is also
| the reason we see near-daily anti-Amazon posts on social
| media.
| Mauricebranagh wrote:
| Exactly he is stepping on the toes of those who own the
| media - its why the UK Press beats on the BBC and British
| Telecom.
|
| BT has a lot a negative press about its sports investments
| but Murdoch's sky doesn't
| [deleted]
| danso wrote:
| He's literally the richest man in the world. If the
| leaker's purported motive is to expose tax avoidance by the
| ultrawealthy, it would be very strange for Bezos to _not_
| be in the leaked data.
|
| I don't think ProPublica describes in exact specificity the
| scope of the data, other than it contains "the tax returns
| of thousands of the nation's wealthiest people, covering
| more than 15 years". And it includes Warren Buffett, Rupert
| Murdoch, Mark Zuckerberg, Larry Ellison, Mike Bloomberg,
| Carl Icahn, and Elon Musk -- a group of guys who, along
| with Bezos, are not considered to be politically aligned.
| mc32 wrote:
| Richest from running a public company [holding stocks]
| not necessarily the richest overall.
| [deleted]
| jessaustin wrote:
| We hope for more leaks about all these other people who
| are richer than Bezos.
| rascul wrote:
| Who is richer? Forbes says he's #1.
|
| https://www.forbes.com/billionaires/
| eurasiantiger wrote:
| There are likely dozens, if not hundreds of criminal
| kingpins with more wealth. It's just not in their name,
| only controlled by them.
| bidirectional wrote:
| Why do you think this?
| lastofthemojito wrote:
| Some folks suspect Vladimir Putin is the richest man in
| the world, but there isn't the sort of public
| documentation that would land him on the Forbes list.
|
| https://www.voanews.com/usa/us-politics/terrible-crimes-
| made...
| mlindner wrote:
| You misunderstand that list. It's not the worlds richest.
| Bezos is actually pretty far down (probably 100 people or
| more richer than him in the world).
| mc32 wrote:
| Possibly oligarchs and middle eastern royals, those kind
| of people.
| bidirectional wrote:
| People whose wealth cannot be calculated as known equity
| valuation * disclosed equity held. That doesn't
| necessarily mean anyone is richer, but they very well
| could be.
| michael1999 wrote:
| Forbes ranks public, acknowledged wealth. Regents,
| oligarchs, gangsters, opaque family trusts, etc. are out
| of scope.
| pempem wrote:
| ^ So would this mean: If we have to show our work on who
| is richest, Bezos is the richest man.
|
| If we were to guess and not be able to prove it, maybe it
| would be Bezos or regents, oligarchs, gangsters, opaque
| family trusts
| reedjosh wrote:
| > regents, oligarchs, gangsters, opaque family trusts
|
| Quite certain it is regents, oligarchs, gangsters, opaque
| family trusts.
| Frost1x wrote:
| While you're not at all saying this, it would be silly to
| try and analyze private and unacknowledged wealth,
| primarily because it would be more difficult to evaluate
| the wealth.
|
| The tax returns need some relative value to compare
| against to show effective tax rates. If most of that
| wealth is illegal and well hidden, it's going to be
| pretty difficult to compare a tax return against and get
| anything meaningful from. At least in these cases, the
| wealth is more glaringly obvious in the open and can be
| more reasonably compared to tax records.
| imtringued wrote:
| I was worrying about some loophole Jeff Bezos was abusing
| but no, his hack is that he has no income. What a joke.
| Time to move on from this garbage article. They didn't
| expose anything except that Jeff Bezos has strong faith
| in Amazon stock.
| mc32 wrote:
| I'm all for people paying taxes they owe. I'm against
| vigilante style leaks when the target hasn't committed a
| crime.
|
| Just because the person is not a sympathetic figure doesn't
| mean it gives people the right to leak this kind of info, be
| they Bezos, Clinton, Soros, Koch, Gates, etc. get them on
| actual evasion if they have.
|
| Otherwise what's the purpose, rich people use tools to
| minimize their taxes? Ok, publish what the tools are and
| promote change in the tax code.
| mjparrott wrote:
| This argument makes every single law moral. It also is
| telling you to not question laws that are in place. If
| "crime" is your definition of moral or immoral I'd love to
| hear your take on any of the civil rights movements of the
| last 100 years.
| mc32 wrote:
| You litigate and appeal and go to your legislators and
| eventually you go to the Supreme Court and you make your
| case.
|
| I mean one is about basic rights the government owes us,
| the other is about us wanting the government to take more
| from particular people.
|
| The civil course is slower but the alternative is
| typically bloody revolutions or Hongweibings, both of
| which set back societies.
| dexterdog wrote:
| > You litigate and appeal and go to your legislators
|
| How do you think most of the rich stay on the good side
| of the law? They have much more direct access to
| legislators via mechanisms that should be illegal, but
| are not because they pay to protect them.
| ric2b wrote:
| Litigate someone else's legal tax returns? That doesn't
| make any sense.
| selectodude wrote:
| The Supreme Court isn't a moral court. It rules on if a
| law is constitutional or not. Plenty of grossly immoral
| laws were considered constitutional by the Supreme Court
| and required new laws to be passed to repeal those
| immoral laws.
| TigeriusKirk wrote:
| Also, this person or persons probably didn't just take the
| information for a few rich people at the top. The probably
| stole the information for many, many more people. These are
| the few they leaked.
|
| What are they doing with the rest of the info?
| eli wrote:
| There's a credible case that tax records should just be
| public. Some places they are. Real estate records are.
| TimPC wrote:
| Making everyone's income public is very different than a
| public record or property ownership. I for one wouldn't
| appreciate people looking up and talking about the income
| of their high-school classmates. Income drives enough
| status in society without it being publicly known and
| discussable.
| eli wrote:
| Hill staffers in DC all know you can look up each other's
| salary on a website, as you can with most government
| workers.
| greedo wrote:
| You don't think high school kids know who's rich and
| who's poor?
| mc32 wrote:
| I kinda knew who had more or who had less, but I did not
| know how much they had or didn't have.
| vkou wrote:
| How do you pass laws to make this behaviour illegal without
| knowing what the scope of the problem is?
|
| Laws take political capital to pass, and without public
| outrage, you have zero political capital to take the first
| step towards reform. Any attempt to pass laws that increase
| transparency will be quashed, because you have no political
| capital to do so, and people taking advantage of this have
| a huge interest in squashing them, so they can keep
| operating in secrecy.
|
| I'm not shilling some weird conspiracy, here. This is
| exactly the purpose behind ag-gag laws. [1] Thanks to them,
| the public can't make an informed decision on whether or
| not illegal activity should be prosecuted or investigated,
| or whether or not currently legal activity should be made
| illegal.
|
| This is a similar situation, except that the financial
| stakes - and the incentives for secrecy - are about a
| thousand times greater.
|
| [1] https://en.wikipedia.org/wiki/Ag-gag
| burkaman wrote:
| Is there a way to promote change in the tax code without
| demonstrating how it is abused?
| scottious wrote:
| Counterpoint: perhaps putting a name and numbers to these
| tax loopholes will make them less abstract for people.
|
| For example, knowing that the richest man in the world
| avoided paying $x billion in taxes using a loophole could
| insight change better than a theoretical story about how
| somebody _could_ use these loopholes.
|
| That being said, I'm still not sure if leaks like this are
| a good idea or bad idea. Just playing devil's advocate a
| bit.
| ashtonkem wrote:
| > I'm all for people paying taxes they owe. I'm against
| vigilante style leaks when the target hasn't committed a
| crime.
|
| This is the obvious consequence of a system that feels
| unfair and unresponsive via normal channels.
| mc32 wrote:
| It's still not acceptable. At least the tax minimizer is
| following applicable laws, this vigilante is not.
|
| They are taking it upon themselves outside the law to
| settle disagreements, but they want to leverage new laws
| to make taxes more aligned with their policy (but
| obviously they are okay with ignoring other parts of the
| law --that's a disconnect).
| ashtonkem wrote:
| I'm not a huge fan of gravity hurting me when I fall
| either, but I've found that railing against it is
| ineffective.
|
| If you want these things to stop, you need to change the
| incentives that people operate on. Anything else will be
| like trying to plug holes in a dam with your finger;
| locally effective at best.
| ivanbakel wrote:
| You can believe in the power of a legal system without
| respecting the specific legal system that you're
| currently living under.
|
| Would it be a disconnect to illegally oppose an immoral
| law - like, say, the legal protection of slaves as
| property - while simultaneously wanting to pass laws that
| you expect people to follow - like, say, making slavery
| illegal? Probably not.
|
| It's inaccurate to treat obedience to the law as a moral
| act. It can only be moral because the law itself reflects
| moral attitudes. Wherever there is a disconnect between
| the law and morality, it is the law that bends - which is
| exactly why laws can be rewritten in the first place.
| temp8964 wrote:
| What immoral law are you talking about? Allowing rich
| being rich? Too rich? You don't like rich being super
| rich? What immoral law is it? Be specific.
| ivanbakel wrote:
| I'm not calling any law out as being immoral - I'm
| pointing out that there's nothing hypocritical in
| circumventing a law you find to be unjust while still
| campaigning for changes to the law that you expect others
| to follow.
| mlindner wrote:
| What law though. You think all tax records should be
| public record?
| jessaustin wrote:
| _And Jesus said to His disciples, "Truly I say to you, it
| is hard for a rich man to enter the kingdom of heaven.
| Again I say to you, it is easier for a camel to go
| through the eye of a needle, than for a rich man to enter
| the kingdom of God."_
| subsaharancoder wrote:
| Context!!..Context!!..Context!!
| gilrain wrote:
| > It's still not acceptable. At least the tax minimizer
| is following applicable laws, this vigilante is not.
|
| The total harm of stealing billions from the public
| dwarfs any concern for the thieves' privacy.
|
| They are following the law, sure... the unfair law they
| pay for to their advantage.
| mc32 wrote:
| Where does the leak show theft?
|
| If you earn $100 a week and tax withholding let you have
| $80 to yourself. That $20 didn't belong to the
| government. It belonged to you. You however, having
| entered into an implicit agreement with society agree you
| will part with your money and give it to the government
| (which is different from its being theirs). Now, if you
| donated some of the $100 to charity or whatever and
| reduce your tax liability, that's not "theft". That's
| part of the initial implicit agreement.
| mensetmanusman wrote:
| This argument assumes wealth is zero-sum, which is false.
| slothtrop wrote:
| No, that's projected. It's not a comment on wealth-
| creation, but rather that 90% of it, the surplus value,
| goes to the top. The middle class is getting squeezed.
| lordlimecat wrote:
| The correct response is to use your legislators to change
| the tax code to be more fair.
|
| Yelling at people for properly taking legal deductions,
| when you yourself take deductions on your taxes, reeks of
| hypocrisy and being mad because Joey got a cookie and you
| didn't.
| wang_li wrote:
| >reeks of hypocrisy and being mad because Joey got a
| cookie and you didn't.
|
| You mean because Joey took his allowance and bought the
| supplies for a lemonade stand, took the money made from
| that to buy the ingredients to make cookies, then took
| the time to bake himself cookies.
|
| It's strange that people find a person who creates &
| grows a company and who pays hundreds of millions of
| dollars in legally required taxes detestable. Yet a
| person who fails to gain the basic education that is free
| to them, who has no ambition, who is literally a drain on
| society, cannot be criticized. It's astonishing to me
| that society accepts and allows people to not have a
| least a high school education.
|
| I wonder what the response would be to an article about
| how trillions in taxes are not paid because there are
| millions and millions of people who simply don't develop
| their personal capital and make decent choices that would
| result in them earning more and paying more in taxes.
| ndiddy wrote:
| I don't know why you are being downvoted. If homeless
| people simply decided to learn Python and read PG essays
| for inspiration rather than being a drain on society, we
| could completely eliminate the homeless problem.
| Hopefully one day the troglodytes making up the rest of
| the world will catch up to our enlightened viewpoint.
| ashtonkem wrote:
| Hard to tell if this is sarcasm or not.
| mc32 wrote:
| It's a riff on the tone-deaf "learn to code"[1] thrown at
| miners and anyone else losing jobs in the transition to
| renewables.
|
| [1] https://www.reddit.com/r/OutOfTheLoop/comments/angr4k
| /what_i...
| wang_li wrote:
| Good one. I do hope people recognize that homeless people
| constitute less than 1% of Americans. By contrast 60% of
| tax returns filed by Americans have negative net tax
| rates. They literally contribute nothing to the running
| of the Federal government, and for about 40% they
| contribute nothing to all other levels of government.
|
| This story is about how the very few extremely high
| earners use sophisticated personal finance strategies to
| minimize their tax burden. On the other hand huge numbers
| of people use the unsophisticated strategy of not
| developing any significant skills or education and not
| earning much money resulting in not paying any net taxes.
| Not talking about the super poor who earn nothing, but
| people who earn $30,000-$60,000/year. At the end of the
| day, they are not net tax payers.
| iammisc wrote:
| Don't know why you're being down voted. I have no love
| for bezos, but insofar as he seems to mostly follow the
| law, contribute to society, and built a large employer,
| he seems more worthy of emulation than the randos we are
| asked to care for on the government dole
| refurb wrote:
| Yup. Few people know that the 401k deduction is a massive
| loophole someone found and exploited. It was never
| intended to be a retirement vehicle or used in a
| widespread manner. There was discussion of repealing it
| as the tax revenue hit was not planned for.
| ashtonkem wrote:
| > The correct response is to use your legislators to
| change the tax code to be more fair.
|
| My entire thesis is that vigilante leaks like this are a
| product of the perceived unwillingness of the legislature
| to deal with the abuse of tax loopholes or to tax the
| rich at anywhere close to the rate that the overwhelming
| majority of voters want. If my theory is correct, then
| saying "talk to your legislator instead" is almost
| hilariously tone deaf, given that these leakers are
| probably taking actions into their own hands in response
| to a belief that their legislator is lazy or corrupt.
|
| More broadly, my point is that singling out individual
| actors is an ineffective way to stop stochastic law
| breaking. Decry and punish individual law breakers all
| you want, but don't expect it to stop until you at least
| triage the underlying causes.
| justanotherguy0 wrote:
| The tax code is the product of the legislature and the
| courts, both of which are accountable to voters.
|
| The bureaucrats are functionally accountable to nobody.
| This leak was instigated by a bureaucrat.
|
| Fuck the bureaucrats.
| jessedhillon wrote:
| There's nothing that can't be justified by this
| reasoning.
| [deleted]
| justanotherguy0 wrote:
| "feels unfair" depends completely on the Overton Window.
|
| What proportion of Americans have a federal income tax
| liability of zero or less? (Yes, some Americans get paid
| to file taxes, via "refundable" tax credits)
|
| I believe it is around 42%.
|
| What proportion of the top income earners pay 80% of
| Federal income taxes?
|
| Our system is overall quite progressive. To complain that
| the five or so people mentioned in the article "only"
| paid billions in taxes over a five year period is a bit
| nonsensical.
| reedjosh wrote:
| > "only" paid billions
|
| It was millions over the period of 2014 to 2018. Not that
| I disagree with your overall point.
|
| Bezos did almost pay $1b himself though. In total the
| people in the article paid under $2b.
| ethbr0 wrote:
| How would top income earners feel without employees or
| workers (either their own or everyone in every business
| they patronize)?
|
| I hate paying taxes.
|
| But I'm honest about what I'm buying for my money -- the
| broader community I live in and happen to like and care
| about.
| vkou wrote:
| Given that the federal government collects its revenue
| through income taxes, and that 53% of Americans are
| children, the elderly, students, retired, disabled, or
| simply unemployed, how many of those people, in your
| opinion, should have a federal tax liability?
|
| Also, another 13% of Americans make less than $12/hour,
| with many of them working under 30 hours a week. Roughly
| how many of those people, in your opinion, should have a
| federal tax liability?
| noobermin wrote:
| See cancel culture, same thing.
|
| Bothered by "internet mobs?" Look at the underlying
| issues.
| koheripbal wrote:
| I don't think these vague emotional statements are
| constructive.
|
| The rules outlined in the article apply to everyone, not
| just the rich, and they should be fixed for everyone, not
| just the rich.
|
| In this case leaking Jeff Bezos' tax returns targeted one
| individual and provided no new useful information. It's
| exactly what we already expected about his taxes.
|
| ...and frankly, the "rich are evil - look how they don't
| pay taxes on unrealized gains" is a huge distraction from
| fixing the _actual_ problems with the tax system.
|
| We need to eliminate foreign tax havens, and severely
| limit non-profit "Foundations".
| whb07 wrote:
| "We need to eliminate foreign tax havens"
|
| or more succinctly:
|
| "We need to condemn the families and businesses in places
| like those tiny island nations in the Caribbean to more
| poverty"
|
| Those tax havens exist because they realize that a very
| real thing they can offer as a service is a place to
| domicile a business and capital. Not everyone wants to go
| to Ireland for its nice beaches you know.
| rrss wrote:
| How does Google funneling billions of dollars in revenue
| through Bermuda help the families there who are living in
| poverty?
|
| Google's only presence in Bermuda was a P.O. box.
| Mediterraneo10 wrote:
| When you use Bermuda like that, you pay various fees to
| do so (registration fees, banking fees), and money
| ultimately goes into the national budget from that. The
| state then invests in infrastructure and some job
| creation from that national budget.
|
| Similarly, when Caribbean nations sell citizenship to
| foreigners seeking easier travel or tax optimization
| (another avenue they have explored into order to
| diversify their economies), the foreigner typically pays
| a fee in the tens or hundreds of thousands of dollars for
| the passport, and that goes into the national budget.
| whb07 wrote:
| lawyers, buildings, contracts, the person selling keys
| for PO Box, guards to watch over your PO Box, mail
| system.
|
| Plus all the other things on top that are associated to
| flying in to Bermuda for the week of business to setup
| your PO BOX.
|
| Oh and then there's the airport, staff to maintain the
| airport.
|
| All that plus more for a simple PO box
| [deleted]
| deelowe wrote:
| At this point, I've come to believe that the real goal
| has nothing to do with actually fixing the system. I see
| it time and time again where articles like this get
| written and the proposals that follow focus solely on
| increasing income tax and proposing some form of a wealth
| tax. Nothing about closing the loop holes that allow this
| situation to happen in the first place.
| scubbo wrote:
| > In this case leaking Jeff Bezos' tax returns targeted
| one individual and provided no new useful information.
| It's exactly what we already expected about his taxes.
|
| I completely agree with your overall point, but this
| statement is not true. Solid concrete evidence of what we
| "already expected" _is_ new information. (also, as other
| commenters have pointed out - what _you_ already expected
| is not necessarily what the average person already
| expected)
| Retric wrote:
| Rules aren't set in stone, they can change based on leaks
| like this.
|
| Assuming people find this information objectionable
| that's a reasonable justification to publish. In much the
| same way that leaking classified documents about
| questionable activities is morally justified, though
| illegal. Otherwise stamping secret on any evidence of say
| torture would work.
| mc32 wrote:
| I find the leak objectionable. It doesn't disclose any
| nefarious doings or tax evasion. All it does is verify
| what we already know. No revelation.
|
| So this is more about shaming the witch rather than
| showing the witch did witchery.
| pmoriarty wrote:
| _" All it does is verify what we already know."_
|
| Wait. What who already knows?
|
| I'm willing to bet that a lot of people who read this
| article did _not_ already know the information contained
| within.
|
| As such the article serves to educate a lot of people,
| which is a positive development.
| mc32 wrote:
| I don't think the author needed leaked data to present
| their objections to tax minimization.
| germinalphrase wrote:
| But it does provide direct evidence (that average people
| can link to prior knowledge) in support of those
| objections.
| ethbr0 wrote:
| They absolutely did.
|
| That something is legally within the bounds of the US tax
| code is public knowledge.
|
| That ultra-wealthy utilize something to an extent is
| _not_ public knowledge.
|
| Which cuts to one of the central issues with viewing the
| US tax code as democratic: there's almost no transparency
| of _use_.
|
| The public might feel very different about a particular
| tax rule if they knew small businesses primarily used it,
| vs if they knew major corporations used it to shield 90%
| of their profits.
|
| The IRS should do a better job of anonymizing _actual_
| tax reports, and reporting out on patterns in aggregate.
| mlindner wrote:
| Talk to any software engineer in the valley and they do a
| lot of the same stuff that Bezos does. The "trick" of not
| paying taxes until you sell the stock is something I do
| all the time. It's not a trick even.
| zentiggr wrote:
| Are you also opposed to
|
| the Watergate leaks?
|
| Snowden's leaks?
|
| the Pentagon Papers?
|
| and a lot of less famous leaks of restricted information
| that have led to exposure and sometimes even justice for
| people who otherwise would have hid behind "legal"
| defenses for immoral or flat out illegal acts of their
| own?
|
| I served in the Navy - I had a prety high clearance just
| to do the job I did. I know the value of classifying or
| otherwise restricting information. And I know the value
| of breaking those rules to expose those who would hide
| their crimes.
|
| I consider the current tax code a recipe/playbook/script
| for stealing from the American public.
| mc32 wrote:
| You are presenting an example of government cover ups or
| crimes. This is not the government doing something wrong,
| not even a private person doing something wrong.
|
| It's simple some vigilante having a vendetta against
| someone they don't like and using illegal mans to skewer
| them.
|
| The case they have is known. We know the loopholes. Let's
| as close them. Don't go out on personal or vendettas of
| virtue when it aids nothing. There is nothing new here.
| Jeff, as much as I dislike his company, didn't commit a
| crime.
| Retric wrote:
| It's your option that these people did nothing wrong.
| However, many legal things like adultery are still
| objectionable and people object to this.
| mc32 wrote:
| the more appropriate comparison in your case would be an
| open marriage where one partner complains the other is
| cheating. They set up the rules then complain someone is
| taking advantage of the rules.
|
| I myself would like Jeff to pay more in taxes. I think
| the super wealthy pay too little in terms of parentage,
| but I should be upset with the Congress/IRS not the
| wealthy.
| Retric wrote:
| PS: To better use your analogy, suppose rich guy X, had
| an open relationship with their spouse (the government)
| and then started dating someone without mentioning their
| marriage. That's much closer to what's going on because
| it's not a question of if what they did was legal but
| rather the secretary around it and the impact on society.
| Retric wrote:
| No, because it's not the government complaining. The
| people complaining didn't create the rules as such the
| rules are irrelevant to their complaint.
|
| Really, it's not a question of laws but one of
| obligations to society as a whole. Because society and
| the government are different entities but society depends
| on it's government.
| naasking wrote:
| > It's simple some vigilante having a vendetta against
| someone they don't like and using illegal mans to skewer
| them.
|
| If the leak's target did nothing illegal or unethical
| with their taxes, then how are they being skewered? Their
| taxes would just show them to be an upstanding, law-
| abiding citizen, right?
|
| So sure, you can claim all you like that we already knew
| about these holes, but abstract arguments and aggregate
| data are far less persuasive and motivating than specific
| examples that clearly show the stark reality.
|
| Or are you forgetting how the George Floyd video
| galvanized a world-wide movement despite everyone already
| "knowing" that racism is bad, that it exists, that police
| training is subpar and that bad cops kill people of
| colour?
| mc32 wrote:
| You're being coy.
|
| As if Twitter and all other social media media weren't
| about taking things and reframing them to make targets
| into bad people.
| naasking wrote:
| You mean ordinary people might develop a bad view of the
| untouchably wealthy because of the system they created to
| preserve their wealth? Cry me a river.
| mc32 wrote:
| >preserve their wealth
|
| Like it or not, they created it.
|
| Should we extract more taxes from them, yes, arguably.
| But we don't have to resort to blackmail or other
| underworld tactics since it really accomplishes nothing
| other than momentary outrage by the mob.
|
| Get congress to enact laws that close loopholes.
| naasking wrote:
| > Get congress to enact laws that close loopholes.
|
| And we do that by exposing the problems of the existing
| system and galvanizing people to demand change. Which is
| what these articles are doing.
| Dracophoenix wrote:
| >>Rules aren't set in stone
|
| The problem with that argument is who get to make that
| decision? Would you still be saying that if someone
| leaked you tax records to the general public?
| Retric wrote:
| Yep, I have no objection to people leaking any of my tax
| details beyond identify theft.
| dexterdog wrote:
| It's hard to commit a crime when you have layers of people
| managing your finances and other layers of people managing
| the people who write and enforce the laws.
| usrusr wrote:
| How dare anyone question an established legal status. Of
| course Mr Bezos owes money to her Royal Majesty the Queen!
| akomtu wrote:
| Not sure why this is downvoted. If americans just blindly
| followed the law, the US would be a British territory
| today.
| naasking wrote:
| > Ok, publish what the tools are and promote change in the
| tax code.
|
| Publishing an actual example of how these tools are used is
| a perfect way to explain what they are and how they're
| exploited. Bezos is rich enough to be untouchable, so
| what's really the concern here?
| godshatter wrote:
| The privacy of the people whose data was leaked.
| naasking wrote:
| All rights have limits, including free speech and
| privacy. We can discuss where those lines should be, but
| by precedent it's established that public figures have
| reduced privacy rights because it serves the public
| interest.
|
| It's clear at this point that extremely wealthy figures
| should expect reduced privacy rights when it come to
| their wealth because it serves the public interest.
|
| You're basically arguing that the public shouldn't be
| aware whether a person owns a nuclear weapon because they
| bought it fair and square and "privacy".
| godshatter wrote:
| All rights do have limits, but this is too soft a limit
| for me, personally. I can understand how someone who is a
| well-known public figure would give up some rights
| related to slander, or being photographed, or whatever.
| But we're talking about private tax data, secured by the
| IRS. Guesses based on what someone makes based on or
| derived from publicly-available information I can
| understand, but leaked private tax documents crosses a
| line I'm not comfortable with. I do understand that
| others might think differently on this topic, though.
| naasking wrote:
| All tax records are public in some developed countries.
| This is a cultural line that should be moved IMO. Maybe
| not all the way to full public disclosure of all records,
| but certainly away from the status quo. Government
| transparency is good.
| pnt12 wrote:
| So you accept all unethical behavior from these
| billionaires and demand ethical purity from everyone else?
| This is quite a toxic double standard.
| mc32 wrote:
| What is unethical about not wanting to pay more taxes
| than the law asks you to?
|
| I'm sure some people donate their own money to Uncle Sam,
| but most people don't and they are not required to.
| akomtu wrote:
| The law that you wrote?
| HWR_14 wrote:
| > Ok, publish what the tools are and promote change in the
| tax code.
|
| That would work if people were purely logical. But people
| are not. Therefore the average person needs an anecdote,
| not data, to start caring.
|
| I also think leaks about billionaire's finances are
| completely fair game. It's not that they are unsympathetic,
| it's that their finances are that important to the average
| person.
| gameswithgo wrote:
| Sticking to your principles too much when the opposition is
| perfectly willing to do whatever it takes may lead to you
| dying on your hill.
| mc32 wrote:
| They are not doing whatever it takes. They are following
| the laws we have enacted. The only one doing whatever it
| takes is this person who seems to think taking justice
| into your own hands is an acceptable thing to do.
|
| I'm not saying we should not close loopholes. I'm all for
| that, but I'm not for willy nilly leaking illicitly
| obtained private documents that do not describe illegal
| behavior nor anything we didn't already know.
| akomtu wrote:
| One correction: they (the rich) are following the laws
| they have enacted. An average Joe can't bribe senators
| (sorry, I meant donate to their campaign), talk to them
| privately and get the desired law enacted.
| zentiggr wrote:
| The flaw here is that they're not following the laws that
| we the people have enacted. They're following the laws
| that they themselves have lobbied for and bought the
| legislators to pass for them.
|
| If you only condone taking legal courses of action, how
| would you go about opposing those billions and the
| leverage over the legislative process that brings?
|
| It's all well and good to take a moral high ground and
| say no one should ever break laws, but when the laws are
| exploitative and the legislators are beyond real
| influence, what other recourse is there?
| ericd wrote:
| Do you have evidence of them buying laws that allow them
| to not pay taxes until a capital gain is recognized?
| Because that's the crux of this whole article, that
| they're paying a small percentage of their "wealth
| gained". As far as I'm aware, capital gains have never
| been taxed on eg company stock in the US before a sale
| triggers it, so it can hardly be considered the work of
| this group.
|
| It gets substantially murkier, too, when you consider
| that much of the nominal valuation gains on their assets
| might be attributable to the dollar being essentially
| devalued vs hard assets.
| socialist_coder wrote:
| What about the point about taking out loans to avoid paying
| income tax, since money from a loan isn't income. Isn't that
| one of the major points?
|
| I don't get how do they pay the loan off though, without paying
| taxes on the money used to pay off the loan. How does that
| work? Any loan I take out, I'd have to get income and then use
| my income to pay off the loan.
| nmfisher wrote:
| I assume if you have a loan of $100,000 secured against an
| asset worth $1 million that appreciates 10% each year, you
| can basically continue rolling over the loan.
|
| As long as the asset value doesn't drop, you never have to
| actually repay the loan with your own cash (at least, not
| until you die or you sell the asset).
| socialist_coder wrote:
| Ahh, makes sense. So they are never paying back the loan
| with earned income. Thank you!
| 2Gkashmiri wrote:
| please help me understand what you call "capital gains". in
| india, when you are holding a share in a company for example,
| its value goes from $1 to $4 in a year. for that financial
| year, your accountant says "hey. you earned $3 as capital
| gains", and its appropriately taxed as short term capital gains
| or long term.
|
| how do American financial statements show "wealth"? i read the
| article but i don't understand. if my personal balance sheet
| was $ 1 at the start of the year and by the closing, i say my
| capital balance is now $2, that means i got the balance through
| some earning so that is what is taxed. why the half assed
| approach to delay till final sale? accrual is an accounting
| word. isn't it?
| RHSeeger wrote:
| > how do American financial statements show "wealth"
|
| That's the point though. This is a tax on income, not wealth.
| And, until you sell the asset, it's not income.
| bkirkby wrote:
| "why ... delay till final sale?"
|
| Delaying until final sale encourages people to keep money in
| the market. Money in the market is, ostensibly, providing a
| value to society as good; probably better, than anything
| government has ever done.
|
| The distinction is "wealth as personal consumption" versus
| "wealth as resource allocation."
|
| The former is something that only benefits the wealthy
| person. The latter is something that already benefits
| society.
| triceratops wrote:
| > The former is something that only benefits the wealthy
| person. The latter is something that already benefits
| society.
|
| Even a rich person's consumption "benefits society"* by
| stimulating the economy. Their spending is someone else's
| salary or profit margin.
|
| *Leaving aside that most consumption is a negative for the
| environment.
| molszanski wrote:
| > "wealth as personal consumption" versus "wealth as
| resource allocation."
|
| Wanted to post exactly the same comment.
|
| We are yet to develop an appropriate terms, that are
| _widely_ understood that describe the problem in details.
|
| Personally, I don't see the problem with "rich getting
| richer". I see the problem with poor getting poorer. It
| seems it is waaaay more complicated then the simple tax the
| rich
| faet wrote:
| If I buy a share of a company for $1 January 1 2019 and it is
| worth $2 January 1 2020 I've got $1 of 'unrealized gains'. I
| pay zero taxes.
|
| If I sold it before 1 year of holding, I'd pay $1 in taxes
| (the gain) at my top tax rate based on my other income. If I
| sell it after 1 year I pay tax at a reduced rate on the total
| gain.
| 2Gkashmiri wrote:
| i am not concerned about selling. i am saying when you
| "accrued" an income, you pay taxes on it.
| kristjansson wrote:
| It's not an income until you sell it
| koheripbal wrote:
| In the US (and most western countries), the difference is not
| reported as income until you actually sell it. This removes
| any debate about the value of the asset.
| 2Gkashmiri wrote:
| my question stands. why doesnt us tax system recognise
| accural of income?
| sidlls wrote:
| It's not income until its sold.
|
| Also, that scheme of taxation just further advantages the
| very wealthy and discourages investment anyway.
| 2Gkashmiri wrote:
| you dont know what accrual is then. good
| pedrosorio wrote:
| Reading a couple of sources on capital gains tax in
| India, it appears to work in the same way as the US
| (taxed only when you transfer/sell the asset):
|
| https://cleartax.in/s/capital-gains-income
|
| https://home.kpmg/xx/en/home/insights/2011/12/india-
| income-t...
| bsaul wrote:
| Because,there's no income until you actually sell.
|
| Imagine someone poor, having bought a small house in a
| sketchy neighborhood for not much. Imagine this
| neighborhood now becoming really fancy with hipsters
| moving in. With your system, the person would have to
| basically sell his house just to pay taxes on gains that
| didn't translate into anything in his real life.
| newhouseb wrote:
| In many places in the US (California aside), property
| taxes are pegged against the assessed value of the home
| and re-assessed on a regular cadence. So the scenario you
| paint can definitely happen.
|
| The way that property taxes work in California is more
| similar to Capital Gains in the US where your taxes are
| based on the sale price (although imposed continually,
| not just when a transaction occurs). The net effect of
| this is that you have neighbors with effectively
| identical homes who pay a full order of magnitude
| difference in property taxes every year (i.e. 2k vs 20k).
| [1]
|
| [1] https://www.officialdata.org/ca-property-tax/
| 2Gkashmiri wrote:
| what is wrong with you. when did i talk about a "poor"
| person. i specifically wrote when you record an amount in
| your financial statements as your "gain", after close of
| financial year, there is no uncertanity of what was
| earned. the actual has happened. why would a regular home
| owner create his financial statement?
| zentiggr wrote:
| You said "accrual of income". Everyone has been trying to
| clarify to you, that the change in value of an unsold
| asset is not income, it is not a gain or loss as far as
| taxes are concerned.
| [deleted]
| mytailorisrich wrote:
| Yes, and that's the only sensible way to do it, IMHO.
|
| The market value of an asset goes up and down all the time.
| There is only an actual gain or an actual loss when that
| asset is sold. That's the appropriate time to tax (and
| that's also when the person is sure to have the cash to pay
| any tax since they have just sold the asset!)
| nybble41 wrote:
| > in india, when you are holding a share in a company for
| example, its value goes from $1 to $4 in a year. for that
| financial year, your accountant says "hey. you earned $3 as
| capital gains", and its appropriately taxed as short term
| capital gains or long term.
|
| Capital gains taxes in India appear to work the same way as
| capital gains taxes in the United States[0]:
|
| > Simply put, any profit or gain that arises from the sale of
| a 'capital asset' is a capital gain.
|
| The tax is only incurred at the time of sale. If you don't
| sell anything then your accountant will report $0 in capital
| gains, even if the value of your assets (on paper) has
| increased.
|
| If you are invested in a mutual fund then (at least by US
| rules) you may have reportable short-term or long-term gains
| despite not actually selling any shares due to trading
| activity in the fund; the taxes are passed through to the
| fund's investors. However, this is unrelated to any change in
| the value of the fund's shares.
|
| [0] https://cleartax.in/s/capital-gains-income
| robbintt wrote:
| Actually, most HNWI capital growth is not taxed, ever. It is a
| mistake to think any meaningful percentage of the wealth is
| sold or transferred, except on a stepped up basis to
| descendants, who likewise will hold it indefinitely. This does
| concentrate wealth.
| vmception wrote:
| Note that assets in a foundations and donor advised funds are
| not reported in anyone's net worth online calculators.
|
| There is no way to predict somebody's net worth and all the
| lists are wrong. There are only a few public things and they
| are all snapshots in time that assume it's still true forever.
| An actor on a big movie? The list will say "we estimate they
| made 20 million, lets list them as a net worth of 20 million
| forever", a non obfuscated real estate property record either
| in someones name or linked to them? Okay we are counting that.
| Aside from that they are just counting shares of public
| companies that large % holders are required to disclose.
| Outside of those slivers you'll still never know if they were a
| savvy and passive investor in other public equities just like
| you are trying to be. You'll never know if they made 1,000%
| more on tech stocks. You'll never know if they assigned shares
| and cash to a charitable organization they control. You'll
| _definitely_ never know what subsequent trades the charitable
| organization made.
|
| But even without pointing at charities: Hedge Funds, VC and
| Private Equity firms are not reported nor are any business
| interest. These things can pay out arbitrarily and also have
| large amounts of funds in any limited partners name.
| gameswithgo wrote:
| Points 2 and 3 are also being accomplished by corporations
| being willing to sponsor politicians that will reduce them _no
| matter how horrible or unqualified they are_ in other domains.
| taneq wrote:
| > voiding the obvious argument that capital gains are
| eventually taxed - the rich are not escaping that.
|
| In one sense yes, but if they're living happily on a tiny
| fraction of their wealth then they can hang on to the rest
| until an opportune time to cash out. Governments come and go,
| taxes are imposed and abolished, loopholes open and close. If
| they can afford to play the long game then "eventually" may be
| very different to what would happen if they cashed out today.
| dapf wrote:
| How about significantly reducing taxes for everyone? Say, no
| more than 5% of anyone's income?
| Mauricebranagh wrote:
| Presumably you would penalise every employee including your
| self that has options?
| koheripbal wrote:
| There's some truth to this - but opposite could happen as
| well. You might get to the end of your life and find that the
| tax situation is even worse. So it's a gamble.
|
| If we eliminated the charitable "Foundation" dodges that the
| super-rich are using, then I think we'd see many fewer people
| playing this game.
| finnh wrote:
| But what's the alternative? Forcing people to sell? Forcing
| people to mark-to-market? There's no way to (fairly) tax
| capital gains except at the time of sale.
| TuringNYC wrote:
| Actually it is even worse -- 1. What happens if the MtM is
| negative (your have unrealized losses) -- does the
| government now owe you a refund?
|
| 2. Isnt this unfairly in favor knowledge businesses where
| there is tremendous value but no real MtM? So a private
| accounting firm with lots of clients gets no real MtM while
| a farm with physical assets gets a high MtM that is taxed.
| jermaustin1 wrote:
| Except the uber wealthy who can afford to lose money to pay
| taxes for the infrastructure that has enabled their
| explosive asset growth.
|
| I agree that you and me, and even my paper-millionaire
| neighbors and friends cannot afford to be taxed on their
| assets, but a billionaire can, even a paper billionaire can
| drum up the cash or debt when needed to pay taxes. They do
| it every day for their large purchases.
| pythonaut_16 wrote:
| That's an argument for a tax on those assets then.
| Corporate taxes for stocks, property taxes for real
| estate, etc.
| greenwich26 wrote:
| Sounds pretty authoritarian.
|
| > Except the uber wealthy who can afford to lose money to
| pay taxes for the infrastructure that has enabled their
| explosive asset growth.
|
| Federal income tax almost never gets used for
| infrastructure. Infrastructure is mostly built by state
| and local governments, which receive most of their income
| from sales tax and property tax, and other taxes, which
| are already almost entirely paid by businesses. So, they
| are already paying for the infrastructure that enabled
| their growth.
| sokoloff wrote:
| A great many state projects are 50-90% funded by federal
| grants. Interstate highway projects and airport projects
| in particular are often 90% federal (and are self-
| evidently infrastructure).
| jessaustin wrote:
| So you're not opposed to property tax? That's just what
| we're considering here, for securities rather than real
| property.
| greenwich26 wrote:
| Various levels of local governments provide many services
| and benefits for my physical property located in their
| jurisdictions, so I do not oppose a reasonable property
| tax. But the federal government provides no services or
| benefits to the securities in my vault, so a general
| federal wealth tax on them is altogether different, and I
| oppose it.
| jessaustin wrote:
| The federal government has spent several trillion dollars
| fighting several disastrously stupid wars over the last
| several decades. Please don't try to pretend all that
| death and destruction wasn't good for the securities in
| your vault.
| simondotau wrote:
| Or if that's too abstract for you, think about how the
| securities in your vault would fair in the absence of
| government maintaining basic law and order; honouring and
| enforcing otherwise fictional property such as copyright,
| trademarks and patents; some degree of redress in a court
| system; and some degree of stability of regulation of
| markets.
|
| So much of the wealth on this planet relies on
| Governments for it to exist and to persist.
| greenwich26 wrote:
| These sort of administrative and bureaucratic activities
| are less than 1% of federal spending though. So your
| argument makes no sense.
| cableshaft wrote:
| Military spending is 54% of the federal discretionary
| budget, though (the discretionary budget is about 1/3rd
| of the total budget). That all contributes to its
| security, if not all directly.
| greenwich26 wrote:
| According to the 2020 figures, national defense was 11%
| of federal spending. Discretionary vs. mandatory seems
| irrelevant here. We might as well say military spending
| is 100% of military spending. It's just dividing it by
| something to make it sound higher, usually for propaganda
| purposes.
|
| Nevertheless I totally agree some part of that 11% will
| benefit business and commerce. But it is still a terrible
| deal. In any other context no one would ever buy
| something with a 90% "commission".
| cableshaft wrote:
| I overlooked that I was looking at the chart from 2015
| sorry about that. I was reporting the number on the chart
| I was seeing, which is why I specified discretionary and
| also said that discretionary was about a third of total
| spending, so it was clear. I just didn't have the exact
| number.
|
| So I did look up actual numbers and the numbers I saw
| were different to yours. In 2020 the percentage was 15%
| (721.5 billion for military of 4.79 trillion budget).
|
| But the exact percentage isn't that important. I still
| don't get the 'not a great deal' part. It's not some good
| you could either buy from retailer X or brand Y. If no
| money is spent on military than the country is ripe for
| invasion, so it's either secure or it isn't. And it's not
| like we want the percent to be higher. Like we don't want
| to spend MORE than the Department of Defense thinks we
| need to secure the country. That's an even worse deal.
|
| Even if you choose to move your assets/business to a
| country that spends a lot less on military, you're likely
| benefitting indirectly from how much the US spends on
| military (assuming it's an ally and the world is stable,
| that might not stay true in the next couple of decades).
|
| Unless you're arguing to pay for a private security firm
| to secure your assets, then maybe you can pray we get to
| a Mad Max style future where it makes sense to do that.
|
| Or you're suggesting it can be bypassed by buying
| cryptocurrency, which is secured by other means than
| government might. If that's the case then I'm on board
| with that thinking.
|
| If your main argument is 'I want all of the money I spend
| in taxes to solely be spent on securing my assets, so
| reduce my taxes!' then that's ignoring the other
| government services those taxes provide.
| igorlev wrote:
| The government very clearly provides for support for the
| equities in many ways (which I'm sure you're aware of)
| How do the following not count as benefits to the
| equities in your vault?:
|
| 1. Maintaining a navy that reduces piracy enough to have
| global JIT delivery networks that reduce costs for corps
|
| 2. Protects corp interests abroad allowing a larger
| market and higher profits
|
| 3. Enforces regulations that attract a larger than
| otherwise likely share of people to put their money in
| the stock market, increasing the value of your equities.
| PaulDavisThe1st wrote:
| 4. Pumps millions/billions/trillions into failed
| financial corporations to prevent the financial system
| itself from collapsing.
| greenwich26 wrote:
| US federal spending 2020: $7 trillion
|
| The entire budget of #1 is about 3% of that, and #2 and
| #3 around 1%.
|
| What a terrible deal.
| willcipriano wrote:
| The problem really isn't people not paying tax. Americans
| have similar expenditures to Europeans on a per capita
| basis ($20,674 US vs $17,202 UK or $20,960 in France the
| highest taxed nation in terms of % of GDP) they just get
| considerably less for their money.
|
| https://en.m.wikipedia.org/wiki/List_of_countries_by_gove
| rnm...
| bradleyjg wrote:
| Probably true in general, but if people are already
| monetizing assets through borrowing then likely: they have
| liquidity and b) the asset has a fairly concrete value.
|
| I'm not sure how you'd write a matching tax provision but
| there should be something. Maybe the answer is to rely more
| heavily on VATs as Europe does.
| teachingassist wrote:
| > Forcing people to mark-to-market?
|
| The Netherlands manages to do exactly that.
|
| > There's no way to (fairly) tax capital gains
|
| The fair part is that it's taxed - otherwise, it's unfair
| on people who are unable to exploit this tax avoidance.
|
| We are talking about people with meaningful wealth. They
| can afford to be taxed without waiting for it to be
| perfectly 'fair'. Letting them pay $0 until its fair
| doesn't make sense.
|
| It makes more sense to pay the expected amount, at least
| until you have the receipts.
|
| Indeed, that's how my own labour income is already taxed. I
| first pay income tax for 2021 based on my income in 2020 -
| whenever it turns out to be too much, I can declare it
| later and will get a refund. But, I can't pay $0.
| chasd00 wrote:
| > We are talking about people with meaningful wealth.
| They can afford to be taxed without waiting for it to be
| perfectly 'fair'
|
| I don't see that holding up in court.
| cool_dude85 wrote:
| Plenty of unfair taxes hold up in court. Property taxes
| are an "unfair tax" in the same sense.
|
| Of course, the assessor can't exactly predict the value
| of a commodity like a home with complete accuracy. Some
| people get undercharged and some get overcharged, this
| might even be a systemic thing. But as long as it's "good
| enough", then the tax works more or less how it should.
| doubleunplussed wrote:
| This is putting the cart before the horse.
|
| What is being proposed is to change the law. A court will
| absolutely uphold that law, once it is written. What it
| would do under current laws is irrelevant.
| Mauricebranagh wrote:
| So if I wait to sell shares when it suits me I a some how
| a monster now ? You do realise that many employees on
| average wages do this.
|
| Even the SWP is cool with employee shares now
| [deleted]
| teachingassist wrote:
| > So if I wait to sell shares when it suits me I a some
| how a monster now ?
|
| Being asked to pay tax on your wealth is not a judgement
| about your moral character.
|
| We ask people to pay tax to benefit society, not because
| we hate them.
|
| Given that shares are fungible, you could just give a
| percentage of your shares to the government as the
| tax/the government could or should accept this as your
| tax payment.
|
| > You do realise that many employees on average wages do
| this.
|
| I'd like to say almost none but I understand the median
| person the US holds a small amount of wealth. If there
| was a progressive wealth tax, you could take people with
| average wealth out of the requirement to pay.
| gambiting wrote:
| >>We are talking about people with meaningful wealth.
| They can afford to be taxed without waiting for it to be
| perfectly 'fair'. Letting them pay $0 until its fair
| doesn't make sense
|
| But....shares are useless until sold. Even if you have
| 1BN worth of shares it means nothing until you actually
| sell them/trade them? In fact, they could be worth
| nothing next week, how can you be taxing someone on a
| hypothetical sale value?
|
| >>Indeed, that's how my own labour income is already
| taxed. I first pay income tax for 2021 based on my income
| in 2020 - whenever it turns out to be too much, I can
| declare it later and will get a refund. But, I can't pay
| $0.
|
| That's literally insane. So you're basically giving your
| government a loan a year in advance? Why? Why not pay
| your income tax when you know - you get your income, like
| the rest of Europe does?
| bzbarsky wrote:
| > Why not pay your income tax when you know - you get
| your income
|
| Yeah, I have no idea why gambiting is not doing that.
|
| The rules in the US is that your estimated tax payments
| have to cover the smaller of 90% of your current-year
| ongoing (quarterly) tax liability or 90% (sometimes 110%
| for high incomes, an there are other special rules for
| farmers/fishermen) of the previous-year tax liability.
|
| So yes, you can make them based on last year's income as
| as safe harbor if you have no clue what's going on with
| your income this year for some reason. Or you can just
| make them based on this year's income as you go.
| rileymat2 wrote:
| > But....shares are useless until sold.
|
| I think there are high profile cases of founders getting
| low interest loans with the shares as collateral. This
| allows spending of the money without losing control or
| paying taxes now.
|
| So, no they are useful before they are sold.
| saxonww wrote:
| Not to mention that at least in the US, decades of effort
| has been put into moving peoples' retirements into
| personal, private investment accounts. Including Roth
| IRA/401k where the entire point was to pay tax on the
| input to avoid it later on the output.
|
| The idea that someone should pay taxes on potential money
| is not a good one, IMO. I think there would be a lot of
| legitimate pushback, and if a plan was adopted anyway
| there would be serious political consequences.
| cycomanic wrote:
| > That's literally insane. So you're basically giving
| your government a loan a year in advance? Why? Why not
| pay your income tax when you know - you get your income,
| like the rest of Europe does?
|
| I think you're misunderstanding. The tax rate they are
| paying is estimated based on the previous year income
| (we'll actually it's a combination of present income and
| previous years) because the tax office can't know your
| exact income (and deductions) until the end of the year.
| So when you do your tax return at the end of the year you
| either get a refund or need to pay some more. I'm pretty
| sure that's how it works in most of Europe (at least in
| most of the countries I'm aware of). So there is no loan
| to the government, they still pay the tax as a rate on
| when the income comes in.
| gambiting wrote:
| OP said:
|
| "Indeed, that's how my own labour income is already
| taxed. I first pay income tax for 2021 based on my income
| in 2020"
|
| It sounds like they pre-pay tax for 2021 based on what
| they paid in 2020. If that's not how it works then I
| retract my statement.
| bzbarsky wrote:
| That is a thing you can do in the US. It is not a thing
| you have to do, by any means.
| teachingassist wrote:
| > But....shares are useless until sold.
|
| This is clearly untrue. At least they have use in the
| ongoing option to sell. I can use them as collateral to
| borrow at least as much as, and probably a multiple of,
| their value.
|
| If you genuinely think they are useless, please give me
| some. I will use them.
|
| > how can you be taxing someone on a hypothetical sale
| value?
|
| Since shares are fungible, the government could just
| apply the tax as a number of shares. Then nobody has to
| worry about defining a hypothetical value.
| throwaway8jun wrote:
| > Even if you have 1BN worth of shares it means nothing
| until you actually sell them/trade them?
|
| Then give 1% of your holding to the government each year.
| Like... a tax.
|
| No need to approximate the value. Hand over the shares.
| robotresearcher wrote:
| > But....shares are useless until sold.
|
| You can borrow cash against them, and live entirely on
| that cash for decades.
| gambiting wrote:
| But......at the moment when you want to repay that debt,
| you need to sell the shares = pay tax on them. You can of
| course pay off the debt in some other way, but presumably
| whatever money you use for that purpose would have been
| taxed too, perhaps even more so than shares are.
|
| And I mean, if I borrow money to help me out until I get
| my paycheck, I don't pay the income tax on the borrowed
| money - I pay it when I get the paycheck.
| doubleunplussed wrote:
| Dollars only have hypothetical value until spent as well,
| but we still tax them.
|
| I'm not super rich but if the government wanted to tax my
| shares, I'd pay the tax out of my income instead of
| buying more shares. I could probably pay a decent chunk
| of it out of dividends too, if I wasn't reinventing them.
|
| Property tax here in Australia is based on hypothetical
| value, the sky doesn't fall.
|
| Even if people have to sell some shares, I just don't
| care, it's not a big deal. Sell em.
| bzbarsky wrote:
| Not all shares can be sold. Especially at all times
| (blackout periods, etc.)
|
| The problem with the oft-cited options example is that
| tax is levied on gain of an asset that in fact cannot be
| legally sold at the time the tax is levied and is often
| enough worthless (or worth a lot less than at tax time)
| by the time it _can_ be legally sold.
|
| Asset-based taxation on liquid assets with deep markets
| and clear prices is indeed probably fine in various ways.
| But if you tax other sorts of assets there are various
| problems, and if you only tax the easily-taxable ones
| people will turn to the other ones to avoid taxation...
| insta_anon wrote:
| > But....shares are useless until sold. Even if you have
| 1BN worth of shares it means nothing until you actually
| sell them/trade them? In fact, they could be worth
| nothing next week, how can you be taxing someone on a
| hypothetical sale value?
|
| Germany does something similar:
| https://de.wikipedia.org/wiki/Wegzugsbesteuerung
| (unfortunately only in German).
|
| Basically your tax advisor agrees with the government on
| a "fair" valuation and you are taxed on a 'fictions sale'
| when you cease to be a German tax resident and hold more
| than 1% shares in a company.
| jameshart wrote:
| > That's literally insane. So you're basically giving
| your government a loan a year in advance? Why? Why not
| pay your income tax when you know - you get your income,
| like the rest of Europe does?
|
| You might be misunderstanding - this is literally how tax
| withholding works. You pay estimated taxes as you go
| through the year, and then file a return at the end of
| the year and settle up with the government to what your
| actual tax liability should be.
|
| That's how most income taxes work in most countries.
| teamonkey wrote:
| When I worked in North America I found this
| incomprehensible at first. I think the reason is because
| you need to manually file a tax return each year rather
| than having it calculated and deducted automatically.
|
| To avoid a massive tax payment at the end of the year,
| you could elect how much tax would be deducted from your
| salary each month. The usual way to calculate it was
| based on last year's income. It wouldn't factor in all
| tax deductions so, at the end of the tax year, and after
| you'd filed the tedious and complicated tax return, you'd
| find that you'd overpaid. Better that than underpaying.
|
| In the UK, usually your employer collects tax monthly.
| They calculate the amount to collect based on your
| current monthly salary projected forward and how much tax
| you've already paid. If there's a mismatch at the end of
| the year, the tax office uses a 'tax code' to adjust the
| amount to collect over the next 12 months.
| RyanHamilton wrote:
| What if you ask them to declare the taxable value, however
| anyone is allowed to step in and purchase the asset listed
| at that value? If you want to list your business as losing
| money and worth no taxable value. Someone can pay what you
| say it's worth and take it over. Using greed to align
| incentives.
| pythonaut_16 wrote:
| This is outrageously favorable to the uber-wealthy (and
| anyone who is an order of magnitude more wealthy than
| you.)
|
| Piss someone off? Maybe they'll just come in and buy your
| house. Cherished one of a kind item? Jeff Bezos likes it,
| so it's his now. Property developer wants to build
| something on your land? Get ready to move, no questions
| asked.
| RyanHamilton wrote:
| >>Cherished one of a kind item? Can you give an example
| of an item with a large resale value that is cherished?
| Most sentimental valuable items tend to be of lower
| value. The ones I can think of, e.g. Wedding rings
| etc..... well if this would drive people to spend less on
| diamond rings or useless trinkets that generate a lot of
| pollution because it's the sentimental value that
| matters, that would be a win.
|
| Any item must be purchased at a +30% premium over the
| recorded value with that extra 30% going to the state if
| a sale occurs. So if you did want to hold onto something,
| you would declare a higher value and get paid extra.
| [deleted]
| nybble41 wrote:
| The problem with that (and all other forms of eminent
| domain) is that the value of a piece of property _to the
| owner_ is often far higher than its value on the open
| market. Even if this is purely a business decision and
| not, say, related to an irreplaceable family heirloom,
| the risk of a forced sale at an inconvenient time would
| be far too disruptive.
|
| For example, let's say you own a car with an appraised
| value of $25,000--meaning that you could buy one similar
| to your for that price (more or less). So you declare the
| taxable value to be $25,000 and pay the corresponding
| tax, and then right before you leave for an extended road
| trip someone decides that they would rather have your
| vehicle than one from a dealer and makes you an offer for
| $25,000 which you cannot legally refuse. Now you're
| without a car and scrambling to buy a replacement and get
| it registered, insured, packed, and ready to leave on
| short notice. Your plans are disrupted and the new
| vehicle, while "equivalent" to the one you had before in
| terms of factory specs and general condition, just isn't
| the same as the one you had carefully maintained and
| customized to your liking.
|
| In practice people would need to over-declare the value
| of any property they didn't want to sell, which
| effectively makes this a tax on how attached people are
| to specific items and not a tax on their "fair" market
| value. The situation becomes even worse if the owner has
| enemies willing to over-pay for the item purely out of
| spite.
|
| One of the fundamental rights of ownership is the right
| to choose not to sell, no matter how much someone offers.
| zentiggr wrote:
| Pretty obvious that insurance companies would make a
| killing here, providing "asset retention" riders.
|
| You get to declare a reasonable value, and if someone
| wants to buy, but you're not willing to sell at that
| time, the insurance company negotiates a substitute
| payment, and works that cost into your retention rider
| rate going forward.
| jellicle wrote:
| Pretty trivial to declare your car at $26,000. The extra
| tax is minimal, and if someone buys it, the $1000 bonus
| will cushion your annoyance.
|
| If we think that "everyone" will have to "overdeclare" in
| such fashion, then obviously the government is collecting
| more revenue than it intended and will lower the tax
| rates to compensate, so in the end, you'll pay the same
| dollar amount in tax on your $26,000 car as you would
| have on your $25,000 car.
|
| So, such a system would work fine. Particularly for
| property taxes, which are currently the subject of much
| scamming (apartment buildings in NYC being valued at a
| few percent of their actual market value, for example).
| nybble41 wrote:
| > If we think that "everyone" will have to "overdeclare"
| in such fashion, then obviously the government is
| collecting more revenue than it intended and will lower
| the tax rates to compensate, ...
|
| If _everyone_ over-declares by the same amount, sure. But
| not everyone will. It depends on how much attachment one
| has to a specific item, how much risk there is that
| someone will attempt to take it, and how painful or
| inconvenient it would be to lose it. And you 're ignoring
| the point about being vulnerable to motivated individuals
| willing to pay above-market rates purely to cause
| trouble.
| zhoujianfu wrote:
| What if the government purposely targeted relatively high
| inflation by printing money (and distributing it to all as
| a UBI).
|
| Inflation seems like a pretty efficient wealth tax... and
| if the money is distributed fairly as a UBI that would
| cancel out the benefits that the wealthy have vs regular
| people to protect against inflation.
| jessaustin wrote:
| Real property is subject to tax every year. Every county in
| USA has an elaborate hierarchy of assessors and collectors
| devoted to this. There's no conceptual reason that
| securities couldn't also be subject to tax on a regular
| basis, and it could be made much simpler by only levying
| the tax on e.g. the top 1% of owners of securities.
| drooogs wrote:
| it's easy to talk about how much other people should pay.
| why shouldn't you pay a regular tax on your assets?
| jellicle wrote:
| The entire middle class already does pay a regular tax on
| their assets. We call it "property taxes". The groups who
| AREN'T taxed on the bulk of their assets are the poor
| (who have no assets) and the wealthy (whose assets aren't
| taxed).
| jessaustin wrote:
| Yes that's what we're discussing ITT.
|
| There are any number of principled reasons to oppose
| paying taxes to USA government, but "I'm rich and I can
| afford the lobbyists and tax attorneys to make the system
| work for me" is not among those.
| dboreham wrote:
| Wouldn't they figure out a way to split their holdings
| into smaller delegate trusts, something like that, to
| come under the threshold?
| jessaustin wrote:
| That's certainly a concern, but the IRS works for us so
| if we choose for them to investigate tax evasion by the
| wealthy they should do that.
| zentiggr wrote:
| You think the IRS works for us... that's cute.
|
| Unless you are a large corporation / billionaire
| yourself, in which case I apologize, yes it works for
| you.
| jessaustin wrote:
| Well, obviously, I _don 't_ actually think that. USA as a
| system of representative government, if it ever actually
| existed, certainly doesn't exist now. There is no way for
| the polity as it exists to stop taking everything from
| the majority of citizens and giving it to the
| authoritarian rich. The eventual answer will be a
| breakup, with the wealthy Pacific states escaping first
| and various other regional subdivisions giving up on the
| dream until finally the DC vampires will have no more
| victims left. Some of these successors to USA will
| reproduce the same broken system, only at a mercifully
| smaller scale. Others, I hope, will reduce the harms that
| arbitrary authority inflicts on humanity. Since we'll all
| still be Americans, many of us will be able to move to
| e.g. western Iowa if they figure out the best way to live
| before the rest of us do. At least once bond-holders are
| no longer tempted to finance our horrible wars we won't
| menace the rest of the world with so many of them.
|
| However, when discussing the various symptoms of this
| fundamental malady, as we are ITT, it's often useful to
| take the marketing at its word. It would be _nice_ if our
| IRS were created and operated in the interests of justice
| for the vast majority of Americans. Let 's imagine how
| that might be, and see how far the actual falls short of
| the ideal. The quicker we see USA as it is rather than
| how it has been sold to us from birth, the quicker we'll
| figure out something else marginally less awful.
| the-rc wrote:
| I agree that forcing people to sell has its issues, but
| perhaps you could have a tax on loans of a certain size
| and/or not being able to deduct as much for the interest
| paid. Then nobody would be forced to sell, unless they
| wanted very large amounts of cash. I'm sure someone could
| find loopholes for those ideas as well.
| taneq wrote:
| I don't know. I suspect the true answer is "there is no
| fair way to tax people equally across multiple orders of
| magnitude of resource ownership and multiple wildly
| different types of resource," especially when dealing with
| individuals who are approaching the same economic ballpark
| as the governments that are attempting to tax them. I'm
| just pointing out that capital gains being taxed
| "eventually" isn't watertight.
|
| And it's not as if the current system is fair. You
| regularly see cases like that kid who won a trip to the ISS
| and had to give it up because it was valued at $X million
| dollars and to accept it he'd have to somehow pay hundreds
| of thousands of dollars in taxes. There's also the issues
| with stock options that come up here from time to time,
| where someone is owed millions in options that they can't
| actually use because they'd have to first pay a percentage
| of the value in taxes.
| mindcrime wrote:
| You could have stopped at _" there is no fair way to tax
| people"_.
| jkhdigital wrote:
| As someone who is currently undergoing a tax audit for a
| year in which I reported ~$20M in cryptocurrency trades
| but only realized about $10k in income from them, I can
| confirm that "fairness" does not appear to be a goal of
| the tax code. Cryptocurrency (and especially derivatives)
| really exposes some of the head-scratching aspects of the
| tax code around capital gains.
| ncallaway wrote:
| Don't these exact same arguments apply to property taxes?
|
| Yet property taxes are very common throughout the US. Would
| you make the same arguments to eliminate property taxes? If
| not, why are capital gains any different?
| finnh wrote:
| (not sure why the downvotes, I just upvoted you - this is
| a solid question)
|
| I suppose because property values are considered to be
| more stable than, say, GameStock puts. But you raise a
| good point, that what we're talking about (really) is a
| "how we should tax _wealth_" vs "how should we tax
| _capital gains_".
| ncallaway wrote:
| I feel like "capital gains" occupy a strange middle-
| ground between income and wealth.
|
| Capital gains clearly represent a change in your wealth,
| and are somewhat "income-like". But they also are a
| persistent thing that you are in control of until the
| time of sale, and are somewhat "property-like".
|
| It seems plausible that we could come up with a
| reasonable-scheme for capital gains taxes that manages to
| accommodate both properties, but I think it'd take a fair
| amount of consideration to make sure that there aren't
| nasty edge cases, and the benefits outweigh the
| additional accounting.
| TimPC wrote:
| Capital gains aren't a strange middle ground. They are
| the best attempt to have an income system work: they
| allow the taxation of income from money. A system that
| taxes only income from labour is grossly unfair to the
| poor. A system that taxes all wealth is overly
| bureaucratic and deeply invasive.
| kbelder wrote:
| I'm against wealth taxes, but you make a good point.
|
| You may have just solidified my opinion against property
| taxes :)
|
| Seriously, evaluating and setting values for property
| takes a lot of resources at the city/county level... it
| would take a massive increase to properly evaluate wealth
| for taxation, because so much of it is completely
| intangible and abstract.
| Majromax wrote:
| > Forcing people to mark-to-market?
|
| For liquid investments that have a well-agreed-upon market
| value, that wouldn't be a problem above a moderate wealth
| threshold. In particular, it should be easy to obtain
| credit against these securities (if necessary/desired) to
| pay the tax bill.
|
| The loans would be very secure, since by definition they
| would have appreciated more than the taxes owing. And if
| the current offsetting-loss notions are retained (e.g.
| losses can be carried back to offset prior gains), if the
| securities fall in value then the taxes paid would be
| refunded, providing another way to repay the loan.
|
| In the meantime, you'd avoid a current inefficiency of the
| tax system that encourages people to hold on to subpar or
| undesirable investments to avoid realizing taxable gains.
| The entire cottage industry of deciding which investments
| are "tax efficient" and should be held in taxable versus
| tax-sheltered accounts should go away.
| varispeed wrote:
| Interestingly I can't hear any party, be it from the left or
| from the right hand side of the spectrum, telling that they are
| going to tackle tax avoidance by limiting 2. and 3. It should
| be frankly quite easy to identify fake costs and "charitable"
| foundations.
|
| They can only talk about minimum Corporation Tax...
|
| What a joke.
| cheph wrote:
| https://itep.org/who-pays-taxes-in-america-in-2020/
|
| When summing up top earners:
|
| - Top 1% of earners paid 24.3% of total income tax.
|
| - Top 5% of earners paid 40.6% of total income tax.
|
| - Top 20% of earners paid 66.4% of total income tax.
|
| Guess their efforts are not that good.
| Yizahi wrote:
| Anyone looking at these numbers should remember that % of
| income tax number is a flat one, linear, meaning that 20% + 20%
| = 40% etc. But top % of earners is exponential, meaning that
| second percentile of earners doesn't equal first percentile, it
| is actually several orders of magnitude different.
| rorykoehler wrote:
| These figures are meaningless without also stating what % of
| income the top x% earned. for example if the top 1% earned 99%
| of all income then paying 24% of all tax doesn't look so good.
| cheph wrote:
| > These figures are meaningless without also stating what %
| of income the top x% earned.
|
| No they are not. But those numbers are also in the link, and
| it is more or less the same, top 1% earned 20.9% of all
| income.
| rorykoehler wrote:
| Those numbers are ridiculous if you think about them for a
| second. The bottom earners probably have zero excess
| earnings but somehow pay similar tax per dollar earned as
| the top 1% earners who have pretty much only excess
| earnings, even when not accounting for inflated lifestyle
| inefficiencies. That is just insane.
|
| Here is another view on the mess of income inequality in
| the US (with Europe for comparison): https://pbs.twimg.com/
| media/DjRkWPeU8AIeWtG?format=jpg&name=...
|
| Indefensible really. Digging your own grave.
| cheph wrote:
| > The bottom earners probably have zero excess earnings
| but somehow pay similar tax per dollar earned as the top
| 1% earners who have pretty much only excess earnings,
| even when not accounting for inflated lifestyle
| inefficiencies.
|
| Again, this is in the source I linked, and if by similar
| you mean, differing by 14.4%, then sure.
| rorykoehler wrote:
| That is basically nothing when you consider the other
| parts of my comment.
| dredmorbius wrote:
| Both you and OP are conflating the _income_ and _wealth_
| question, which is what ProPublica 's article specifically
| addresses.
|
| By considering _income_ but not _wealth_ as taxable, the
| system skews automatically to highly regressive, furthering
| wealth inequality.
| jkhdigital wrote:
| Stratospheric wealth inequality is much more a consequence of
| monetary policy than tax policy. When the apparent goal of
| policymakers is to prevent large sustained drops in the value of
| financial assets, then those who primarily own financial assets
| will see their wealth effortlessly increase while the majority of
| the population who trade labor for money will remain in place.
| ericjang wrote:
| I'm curious how many people take advantage of the "borrow money
| against equity to finance lifestyle" approach. At what net worth
| / amount of equity does this strategy start to make sense? 100k?
| 500k? 10M?
|
| I've heard that wealth managers offer very competitive (sometimes
| zero interest!) rates because what they are getting in return is
| your social / professional network's business.
| Scandiravian wrote:
| My knowledge of the American tax system is limited to "I know it
| exists", so I hope someone can enlighten me on this:
|
| If it's possible to use your investments as collateral for a
| loan, is there anything stopping you from reinvesting that into
| the stock market which (if your investment is large enough) will
| push up stock prices? This would increase the value of your
| position and allow you to take out additional loans, rinse repeat
|
| I'm not suggesting "targeted" market manipulation or even
| malicious intent, but with enough wealth accumulated by a small
| group, it seems that as long as everyone has diversified their
| investments broadly, everytime someone invests with borrowed
| money it enables someone else to do the same
|
| Am I missing something here?
|
| Edit: the relation to the American tax system wasn't clear in the
| original post. My thinking is that this could create a
| unsustainable loop, where tax-free wealth increases are created
| by a circle of debt accumulation
| kristjansson wrote:
| > reinvesting that into the stock market
|
| Yes! Certain classes of loans against securities (e.g. pledged
| asset line[0]) cannot be used to buy more securities. Margin
| loans, on the other hand, can be reinvested to add leverage,
| but come with higher interest, more regulations, limits on
| borrowing relative to equity, etc.
|
| Of course, like many things, the Very Rich can get around some
| of those limits viz. Bill Hwang doing (apparently) very much
| what you describe.
|
| [0]: https://www.schwab.com/pledged-asset-line
| throwawayffffas wrote:
| The thing that ticks me of most about this article is that the
| invented "True tax rate" obscures the fact that Michael Bloomberg
| had an effective income tax of 2% in the period they are talking
| about.
|
| My point being the selected group of people is already paying
| effective income taxes at rates lower than a lot of people you
| don't need to make shit up to show the system is busted.
| heipei wrote:
| I don't understand why so many people applaud hefty inheritance
| taxes, with some far-left voices demanding inheritance taxes well
| above 90% or even 100%. It feels to me like this is sending the
| signal to "use it or lose it". While everyone is talking about
| cutting unnecessary consumption you're effectively telling people
| to spend all their money on frivolous luxury items because they
| can't pass it on to their children anyway. As someone with
| children, my main motivation is living within my means and
| keeping the rest of my assets as a retirement/rainy-day fund, or,
| after my demise, to have it passed on to my children. If you tell
| me I can't do that I might as well just buy an expensive sports-
| car tomorrow...
| metabagel wrote:
| Currently, the inheritance tax exempts the first $11.5 million
| of an estate from the estate tax. Do you think your heirs will
| need more than that? This threshold goes up every year, by the
| way.
|
| I think it's generally accepted that there should be a minimum
| threshold for the estate tax. You can consider it to be implied
| unless specifically stated otherwise.
| heipei wrote:
| I should have added that I'm German, and here the estate tax
| is only exempt on the first EUR500k for spouses and EUR400k
| for each child. And everything above is taxed between 25% and
| 50% depending on your income tax bracket. Real estate is
| exempt if the heirs continue to live in it for at least 10
| years. Edit: And yet I've heard the calls for 90%-100% estate
| tax from voices in Germany...
| alok-g wrote:
| Here's the motivation:
|
| To maximize social developments, we reward those who create
| value for the society. If someone, via their own efforts and
| without stealing/fraud, generate a lot of wealth, they would
| have invariably added value to the society by creating a win-
| win for the buyers, employees and themselves.
|
| When however someone born to a rich person inherits wealth,
| they are at an unfair advantage for something that they did not
| really accomplish, and not for any value they added to the
| society.
|
| The world should aim to equalize opportunity for everyone
| (irrespective of who they are born to), and then reward them
| when they create more value than others from the same
| opportunity. Agreed that defining "equalized opportunity" is
| hard -- what all would it cover, health?, edutcation?, etc.
| However, even with some challenges here, this may be better
| than the current system.
|
| The "use it or lose it" would make the wealthy put money back
| into the system, and automatic adjustments would result via
| supply and demand balancing. I understand that it would also
| increase wastage, and this would need some thinking through. My
| gut reasion however is how much money can the super rich really
| use and waste? Ultimately, even items bought by them but unused
| may be reusable by others (who ideally should not be their
| hiers at 100%).
| ttt0 wrote:
| That's cool, but unless we're talking about some sort of
| progressive inheritance tax, it's not just about filthy rich
| people, but all of us.
|
| For example, if I die, why shouldn't I be able to pass my
| house onto my children? Real estate is really goddamn
| expensive, so do you expect me to force my children into debt
| slavery just so they can afford a decent place to live?
| alok-g wrote:
| >> unless we're talking about some sort of progressive
| inheritance tax, it's not just about filthy rich people,
| but all of us.
|
| Agreed. It cannot be abrupt. There needs to be gradations
| and caveats*.
|
| >> why shouldn't I be able to pass my house onto my
| children
|
| That should be reduced for equalizing opportunity for those
| children who are born without such a previledge.
|
| Yes, I agree we love our own children more, naturally.
| That's a result of biological evolution.
|
| However, social policies are inherently by nature aimed at
| balancing the good of individuals with the good of the
| society overall. (For sake of example, lairs lie as they
| reap some advantages out of doing so. However, we consider
| lying bad as it takes the society farther away from the
| optimal point of operation.)
|
| We can't also take away what nature built, so self-interest
| or the love for children cannot be taken off completely.
| And that's how "progressive inheritance tax" would come
| back into the picture.
|
| * Sample caveat: If a child develops some illness, a parent
| should be able to spend more on her/him. There are again
| different means to handle this too -- the two _extremes_
| being all children being treated equal irrespective of who
| the parents are, children of God, one may say :-), and then
| insurance or government funds handle such caveats. The
| other extreme is where parents solely help the children.
| The answer I believe lies somewhere in the middle of the
| two extremes.
| ttt0 wrote:
| > That should be reduced for equalizing opportunity for
| those children who are born without such a previledge.
|
| So should I be able to pass my house to my children or
| should it be taken away from them simply because they
| have a "privilege"? Because there would be zero fairness
| in doing that.
|
| > However, social policies are inherently by nature aimed
| at balancing the good of individuals with the good of the
| society overall.
|
| I understand that. The problem is that I don't see how
| this particular social policy would be a positive to
| society. As GP pointed out, "you're effectively telling
| people to spend all their money on frivolous luxury items
| because they can't pass it on to their children anyway."
|
| I guess as long as you don't take my stuff away I
| shouldn't have any reason to be against it, but as this
| policy fails miserably and you realize that it didn't
| solve all of our problems, you're going to come after me
| as well, so my final answer is no, I'm against it.
| alok-g wrote:
| I understand the difficulty already. This is tricky, will
| involve caveats, and unless well-thought though, it would
| have easy means for people to evade. This certainly isn't
| something that I could frame by myself. :-)
|
| However, I feel that this is often rejected too soon. :-)
|
| Help devise what could be a better policy that tries to
| equalizes the opportunity to all newborns. I think such a
| policy could have exponential impacts on the society.
| ttt0 wrote:
| It's rejected, partly because it's frankly offensive for
| a lot of people. You have no idea how much work, sweat
| and blood it took and how many sacrifices were made by my
| ancestors, a poor farmer family, so we can have this so-
| called privilege of being in the middle class. Taking it
| away and keeping everyone down is like a spit in their
| face. I guess it's not so bad if it's a progressive tax,
| but still.
| alok-g wrote:
| I understand that.
|
| Such a proposal cannot be introduced on a given day and
| applied to all. It can only be a slow implementation done
| over say two generations.
|
| People would need to see it coming, take that into their
| understanding and calculations as they move towards it.
|
| In other words, grandfather clause would need to be
| there.
|
| https://en.m.wikipedia.org/wiki/Grandfather_clause
| perryizgr8 wrote:
| > While everyone is talking about cutting unnecessary
| consumption you're effectively telling people to spend all
| their money on frivolous luxury items because they can't pass
| it on to their children anyway.
|
| People will easily find a way to pass wealth to children. Naive
| example:
|
| 1. Register company in kid's name.
|
| 2. Buy a penny from his company for $1B.
|
| 3. Die peacefully.
| bidirectional wrote:
| That's called tax fraud. It's not only a naive example but
| also useless, the system isn't that bad.
| perryizgr8 wrote:
| So it is fraud and useless both? Seems like it would have
| to be useful to be termed actual fraud.
| bidirectional wrote:
| It is fraud, which is why it is a useless example.
| perryizgr8 wrote:
| So is the example useless or the scheme? Because you have
| contradicted yourself twice in the last two comments.
|
| If it is a useless scheme that would indicate that it
| doesn't actually save taxes by illegal means. If true,
| that means it is not fraud.
|
| Otoh, if it does allow you to save taxes illegal, then it
| is not useless and could also be counted as fraud.
|
| So it cannot possibly be useless and fraud at the same
| time.
| Joeri wrote:
| In our modern economic system wealth accrues more wealth. If
| you don't actively redistribute the wealth, not just the
| income, then you end up with wildly unequal societies, in
| essence what we have today. Wildly unequal not just in terms of
| resources but also in opportunity. If you believe that equal
| opportunity should be a birthright of everyone then a sensible
| way to deliver a more equal opportunity for each new generation
| is to redistribute the wealth tied up in inherited estates from
| those with a lot of opportunity (the inheritors) to those
| lacking opportunity.
|
| Do you understand it better when put like that?
| bzbarsky wrote:
| It seems to me that you're speaking a bit past heipei's
| question, which is about the actual consequences, as opposed
| to the intended ones, of policies.
|
| If you have a 90-100% estate tax, then the intended
| consequence might be "redistribute the money via the
| government" but the actual consequence is much more likely to
| be "most of the money is spent on luxury consumption, because
| why not?".
|
| At lower levels of estate taxation intended and actual
| consequences might align better, of course. This is pretty
| specifically a question about calls for near-100% estate
| taxation, not a question about why there's an estate tax in
| general.
| manuelaljibes wrote:
| I don't care about society at large, I only care about my
| own.
| emc3 wrote:
| And... you're a piece of shit, thanks for sharing!
| dang wrote:
| Obviously you can't do this here, and I've banned the
| account.
|
| Could you please stop creating accounts to break HN's
| guidelines with?
|
| https://news.ycombinator.com/newsguidelines.html
| ttt0 wrote:
| What's wrong with an unequal society? I get that you might
| want to help out the poor, but I don't care if someone has
| more money than me. I don't like what some of those rich
| people or corporations are doing to the society, but I really
| don't care about their money.
|
| When you talk about opportunities, what do you specifically
| mean by that?
| alok-g wrote:
| >> When you talk about opportunities, what do you
| specifically mean by that?
|
| I said some in another comment here:
|
| https://news.ycombinator.com/item?id=27434550
| tolbish wrote:
| Considering how many things in our society are effectively
| illegal for the poor (e.g. the concept of fines for
| breaking the law as opposed to jail time) but legal for the
| rich, it's pretty clear why an extremely unequal society is
| inherently evil.
| ttt0 wrote:
| How's that inherent?
|
| It's still illegal for the rich by the way. At some point
| your bail will be denied by the court, if you're a repeat
| offender.
| tolbish wrote:
| Think hard about the concept of bail while you're at it.
| It is essentially the purchase of temporary rights for
| people who have not been convicted of a crime. The
| underlying question being: "Who should be allowed to have
| their freedoms, and should it be based on your wealth?"
| Frost1x wrote:
| Wealth becomes a proxy for power, freedom, liberty, and
| so forth in our society.
|
| The most obvious example is that the very wealthy do not
| have to work. Their wealth snowballs at some point
| through investment vehicles and others manage their
| wealth. At that point you can do whatever you want with
| your life.
|
| You and I on the other hand may not have that option. I'm
| in a high income bracket relative to most,, but I still
| rely on my labor (time), even if I live frugally. I
| _have_ to spend a large portion of my life working to
| remain solvent in society. I could reject society and go
| out into the woods as a survivalist or become homeless
| but that 's not a very desirable life for many to live.
|
| To your example, let's say the offense is a speeding
| fine. If I get a fine for speeding, depending on the
| state and speed, you can accumulate these indefinitely.
| At some point it's just a fee to do something you want to
| do.
|
| Let's assume that you can't speed indefinitely though,
| let's say it's a wreckless driving offense, well for me
| I'm out of options--after a ticket or two I'll lose my
| license to drive which is critical to my livelihood. I'll
| go to court for repeat offenses because I'm the driver.
|
| What if I'm really rich and I hire someone to speed for
| me: a driver? As a passenger I have no legal
| responsibility, it's the driver. I could cycle through
| drivers willing to speed for me whenever they lose their
| licenses for wreckless driving. If I pay them enough, I
| guarantee you'll find drivers willing to speed regularly
| for you. The money goes back into the economy, sure, but
| using wealth, I've passed risks and liabilities off to
| others and inherently can do things others in society
| cannot. I've got you to trade your freedoms to drive to
| my desire to speed. Wealth has been used as a proxy to
| give rights someone otherwise wouldn't have. This is one
| silly example but there are many rights and laws that
| have no sort of co-conspirator offense wealth can buy
| away. We realized this with murder which is why you can
| be charged when you pay someone to murder someone else.
| Not all laws have these catches, buying co-conspirators
| rights.
| ativzzz wrote:
| > The most obvious example is that the very wealthy do
| not have to work.
|
| Why is this a problem? People don't become wealthy
| through not working. Either they, or their parents or
| some of their ancestors worked to allow not working.
| What's wrong with that?
|
| For what it's worth, the very poor can also avoid working
| and live off the government (obviously being poor and not
| working is a much shittier situation than rich and not
| working)
| ttt0 wrote:
| During communism in my country we still had a corrupted
| ruling class with more power, freedom, liberty and so
| forth. I'm never going to be a part of it and have the
| same options either way. Nor do I even have any desire to
| be a part of it.
|
| > Let's assume that you can't speed indefinitely though,
| let's say it's a wreckless driving offense, well for me
| I'm out of options--after a ticket or two I'll lose my
| license to drive which is critical to my livelihood.
|
| That's pretty much how it works in my country. I believe
| the only exception is when you have governmental immunity
| and that has nothing to do with wealth.
|
| > What if I'm really rich and I hire someone to speed for
| me: a driver? As a passenger I have no legal
| responsibility, it's the driver.
|
| And guess what happens then? _He_ will lose his driving
| license too and he won 't be able to do this job anymore.
|
| Maybe instead of flipping the entire society upside down
| you should simply improve the law to prevent such
| scenarios. It can be done.
|
| Comparing this to murder is too much of a stretch to me.
| dredmorbius wrote:
| https://news.ycombinator.com/item?id=27441362
| rrss wrote:
| if an estate is worth less than ~$10 million, it is exempt from
| the estate tax, so you can pass on a few million to your
| children no problem.
|
| IIUC, basically no one with significant estates actually pays
| the estate tax, so I don't think this actually matters, but
| estate taxes are good because dynastic wealth is the absolute
| worst.
|
| > The growing disposition to tax more and more heavily large
| estates left at death is a cheering indication of the growth of
| a salutary change in public opinion....
|
| > Of all forms of taxation, this seems the wisest. Men who
| continue hoarding great sums all their lives, the proper use of
| which for public ends would work good to the community, should
| be made to feel that the community, in the form of the state,
| cannot thus be deprived of its proper share. By taxing estates
| heavily at death the state marks its condemnation of the
| selfish millionaire's unworthy life.
|
| > by all means such taxes should be graduated, beginning at
| nothing upon moderate sums to dependents, and increasing
| rapidly as the amounts swell, until of the millionaire's hoard,
| as of Shylock's, at least "_____ The other half \ comes to the
| privy coffer of the state."
|
| - Andrew Carnegie, Wealth, 1889
|
| If you have a personal wealth more than $10 million (or
| whatever the estate tax exemption limit is/will be), then yeah,
| you should spend some of it on stuff that you think is
| worthwhile. It doesn't need to be a fast car - Carnegie was
| into libraries.
| boringg wrote:
| Does this author understand capital gains? It seems they are
| conflating unsold equity paper value vs sold. Ie that the
| individuals gained a lot of money on paper but haven't sold it
| and this haven't yet paid taxs.
|
| It seems very inflammatory not to mention the very shady nature
| of accessing illegally irs documents.
| dennis_jeeves wrote:
| Here we go again. My lord, what a blood thirsty crowd here,
| baying for the blood of the rich.
| CryptoPunk wrote:
| The income tax is a massive violation of privacy rights. You are
| forced, under pain of imprisonment to disclose this intimate
| information, only for it to be leaked to journalists who disclose
| it.
| nemo44x wrote:
| The trick is to have enough assets so that you don't have to sell
| them for money. You get a loan against your assets (which in
| today's climate very likely has a smaller interest rate than
| you'll see in appreciation of your assets) to live off of, which
| is tax free. You pay that loan back over 10 years and each year
| you sell a small portion of assets to limit your tax and/or you
| take out other loans to help pay for previous ones.
|
| Imagine you have $2,000,000 in liquid assets that appreciate
| around 6% annually on average. You borrow $100k at 3.5% over 10
| years. In year one you'll pay back ~$13,500. So you sell %13,500
| in assets which won't even be taxed.
|
| In year 2 you borrow another 100k and sell some assets that lost
| value during this time using tax loss harvesting and/or you
| borrow even more money to help pay back interest and principal on
| older loans. You can continue this indefinitely as your
| compounding assets are returning much more than your loan
| interest.
|
| In essence, with enough in assets you can easily create a
| perpetual income machine that has no or little in terms of
| taxable income. With clever accounting, tax loss harvesting, and
| smart deductions/credits you can avoid paying taxes more or less
| through debt-as-income.
| Black101 wrote:
| wow, only one top-level comment on the first page of comments...
| Maybe HN should load all comments minimized by default, and only
| load them when you expend them.
| dredmorbius wrote:
| You can send suggestions to hn@ycombinator.com
|
| I'm aware that there are several enhancements to comments
| display and especially large-thread display, in the works.
| Yesterday's load-induced outages were probably related to this.
|
| More graceful presentation of large threads is something HN
| could improve. It's a hard-ish problem, though there've been
| some elegant solutions elsewhere.
|
| Kuro5hin progressively auto-collapsed threads as size
| increased. K5 itself is dead, though the Scoop CMS it ran on
| still has a site up and the behaviour can be seen here:
| http://www.scoopdev.org/main (Go to a discussion, toggle the
| display mode between Threaded, Nested, Minimal, Flat, Flat
| Unthreaded, at the bottom of the page, JS required.)
|
| On Reddit, the default UI accepts a "?depth=<count>" argument,
| which can make large threads more readable. Reddit Enhancement
| Suite has a "hide all child comments" feature.
|
| (I've forwarded your suggestion BTW.)
| sillysaurusx wrote:
| Seconded about loading all the comments. Or at least change
| the color of the "more" instead of "reply", so that you can
| quickly see from toplevel where the additional comments are.
| But it's a tricky problem.
| Shorel wrote:
| Being into scientology.
| wonder_er wrote:
| Feels like the real interesting figure is that average americans
| seem to have ALL OF THEIR INCOME GROWTH taxed away:
|
| > It's a completely different picture for middle-class Americans,
| for example, wage earners in their early 40s who have amassed a
| typical amount of wealth for people their age. From 2014 to 2018,
| such households saw their net worth expand by about $65,000 after
| taxes on average, mostly due to the rise in value of their homes.
| But because the vast bulk of their earnings were salaries, their
| tax bills were almost as much, nearly $62,000, over that five-
| year period.
| zaptheimpaler wrote:
| I think the understanding of wealth as a huge number doesn't make
| a lot of sense. Basically they have enough money to buy whatever
| they want (which seems fair enough given their contributions) ,
| and if/when they do they will be taxed on it. If not spent, it's
| just a number going up, and it doesn't take anything away from
| anyone else.
|
| Even the dynastic power argument is not so strong. Bezos power
| comes from running a hugely important company, not money. As
| public companies, his children won't inherit Amazon and its
| power, the people who worked hard alongside him will. There's
| plenty of multimillionaires with no power. Money can't buy that
| level of power.
|
| The companies themselves should not be allowed to dodge taxes.
| But the focus on their personal wealth is driven by envy IMO.
| greyhair wrote:
| And Republican Senators have declared opposition to a world wide
| 15% minimum corporate tax.
| lumberingjack wrote:
| Every generation there's a story like this you live long enough
| and you just roll your eyes when you see the same issues crop up
| like every 20 years but nothing ever happens
| WhompingWindows wrote:
| To target ultra-wealthy individuals, I like the idea of a value-
| added tax (VAT). For a car for example, this would tax the steel
| producers, the components producers, the Ford plant, the
| dealership, and the consumer...but adjusting the VAT to be
| progressive, you can make it so the consumer doesn't bear much
| VAT at all, if you prefer.
|
| Would this work in financial industries? I can see it working
| with products that value is added into, but for financial
| instruments I'm not sure how that'd operate.
| boringg wrote:
| This makes me very uncomfortable about giving information to the
| IRS in that they have clear security gaps.
| antr wrote:
| It's disappointing to see how these sort of articles mix "wealth
| growth" (i.e. a paper gain such as the increase in the value of
| your house), with income tax. How easy it is to mislead people to
| take a side on the rich vs poor politically-driven fight.
| xbpx wrote:
| Since the 80s Raegan era cuts, inequality has grown massively
| owing to reduction of wealth, capital gains and inheritance
| taxes.
|
| The end result is a much more unequal society with the
| attendant effects on politics, happiness and social stability.
|
| The rise of the nativist right, the skewing of Dems to educated
| progressive elite and the abandonment of the bottom 50%.
|
| If it is income, wealth tax, capital or some new form, the
| outcome has been clear. This article shows the process of
| rising inequality.
|
| Income tax or not.
| hemantv wrote:
| And US has become global powerhouse with world technology
| companies on its soil due to incentives provided by
| government to setup new businesses.
|
| Would you prefer a world more of these tech giants were in
| China
| antr wrote:
| >> If it is income, wealth tax, capital or some new form, the
| outcome has been clear.
|
| In 1980 the US Govt collected $517 billion in taxes ($1.68
| trillion in 2020 terms). In 2020 this number was $3.71
| trillion. So then, the US Govt is collecting over 2.2x in
| taxes and inequality keeps getting worst.
|
| How can it be that with more tax revenues, people are worst
| off?
| jppope wrote:
| As a tangental point, I would like to point out that the United
| States has ~5 trillion in tax revenue annually. From which we
| spend the most per capita in categories such as education, and
| healthcare. We are continually rated worst in the developed world
| in those categories per dollar spent. We don't really need any
| more tax revenue.
|
| There can be an argument for redistributing the tax burden, but
| it's really a secondary argument to the poor value of our money
| once it hits the public sector.
| mrkurt wrote:
| We don't spend more per capita on education and healthcare
| _from federal tax money_. These costs are mostly born by wage
| workers paying either property taxes (again, taxing their
| primary means of wealth generation) or paying through their
| employer for health care.
| K0balt wrote:
| Unless you are a wage or salary earner, it is trivially easy to
| avoid having to pay taxes, at least in the USA. Same with the
| much lauded "inheritance tax" and even, to a lesser extent, sales
| taxes. It costs about 4000us a year to maintain the legal
| structures required to pay essentially no taxes, except sales
| taxes in some locations. In many cases, for lower levels of
| income, just having a small business can negate income tax
| burdens.
|
| Taxation always has been, and continues to be, a burden for the
| servile class to bear. The rich or enterprising pay taxes only
| when they are ill prepared or choose to, often to reduce
| scrutiny.
|
| The " I should pay more taxes" rhetoric from the wealthy is
| merely virtue signaling, it is totally legal to pay more taxes
| than you owe, and you can even reclaim the money later if you
| need to. There is nothing preventing anyone from paying the taxes
| that they feel that they should owe, in excess of legal
| requirements.
|
| By and large, sales taxes are more evenly applied, but that too
| is far from perfect.
| furyg3 wrote:
| I remember a speech by the British comedian David Mitchell.
| There had been recent scrutiny on a celebrity figure when it
| came to light that he used all sorts of dirty (but legal)
| tricks to avoid paying income tax.
|
| Tax avoidance is, of course, legal. In this sense the rich are
| allowed to choose how much tax they wish to pay, based on their
| individual conscience or morals.
|
| So effectively, governments have a 'tax on moral behavior',
| which is stupid.
| refurb wrote:
| By "dirty (but legal) tricks" you means following the the tax
| code and legally paying what you owe?
| anonymoushn wrote:
| That's one framing. Another framing is that if you think we
| ought to have roads and socialized healthcare and so on,
| then it seems like it's a bad thing if people are
| financially incentivized to pay a small platoon of rule-
| understanders to prevent their money from being spent on
| those things you think we ought to have.
| throwaway0a5e wrote:
| This framing seems like a classic case of "yesterday's
| compromise is today's loophole".
|
| The rules and their various exceptions and special cases
| were put in to be used. Would you complain that someone
| takes a right turn on red where allowed or complain that
| someone builds a structure to the maximum specifications
| they can before incurring additional permitting or
| construction compliance requirements?
| anonymoushn wrote:
| If I was alive when the special cases were put in, I
| would also have told you that I did not care for them.
|
| If the rules create incentives that lead to bad outcomes,
| it is a problem with the rules.
|
| I generally regard people building large buildings as a
| good outcome, so about the max-without-x-permit-sized
| buildings, I probably would not be too upset, but I would
| have to think about what buildings would exist in the
| absence of the rule.
|
| Do you level the same criticism at people who are upset
| that they are employed for just less than full time?
| "Well you see, you voted for Barack Obama, and he spent
| all his political capital to pass a subsidy for the
| insurance industry, and as part of a compromise internal
| to the Democratic party that subsidy included incentives
| to employ people for less than full time, so really this
| is on you" and so on?
| throwaway0a5e wrote:
| >If the rules create incentives that lead to bad
| outcomes, it is a problem with the rules.
|
| So then why complain about the people following the
| rules? They're just making the best of the situation
| they're in.
|
| >I generally regard people building large buildings as a
| good outcome, so about the max-without-x-permit-sized
| buildings, I probably would not be too upset, but I would
| have to think about what buildings would exist in the
| absence of the rule.
|
| So then it's about whether or not you like the outcome
| that rule provides?
|
| Regardless of how much you care about compliance with the
| law it is farcical to pick and choose laws that get
| special treatment (within the same class of laws, we're
| not talking about dodging sales tax vs murder here). You
| don't get to pick one area of minor noncompliance to be
| good guys and one area to be bad guys, equality under law
| and all that.
|
| >Do you level the same criticism at people who are upset
| that they are employed for just less than full time?
|
| I levy the criticism at the people screeching online
| about how the companies that do it are evil, as if they
| have a choice and it's not a collective action problem.
|
| Sure Home Depot could take a stand and give everyone 40hr
| and eat the cost of the healthcare requirements but then
| Lowe's would eat their lunch. The only way to fix these
| problems is to change the rules for everyone.
| anonymoushn wrote:
| > So then why complain about the people following the
| rules?
|
| I did not.
|
| The rest of your comment seems to be about the same
| misunderstanding.
| sidlls wrote:
| Here's another framing: I think the government ought to
| fund infrastructure, healthcare, and so on, and also that
| it doesn't mainly because it's filled with corrupt
| lackeys of the wealthy elite, and even where it does fund
| these things the mechanism of distribution (government
| contractors) is also corrupt. It's perfectly rational to
| attempt to minimize funding that.
| stordoff wrote:
| I suspect you're thinking of
| https://www.youtube.com/watch?v=xc8epam4NyY
| llimos wrote:
| Absolutely brilliant
| mytailorisrich wrote:
| > _In this sense the rich are allowed to choose how much tax
| they wish to pay, based on their individual conscience or
| morals._
|
| Not so. There's the law that dictates a minimum amount of tax
| payable and everyone is entitled to pay only what is strictly
| owed under the law and not more.
|
| Conscience and morals have nothing to do with it and in my
| view playing that card in an attempt to make people pay more
| than legally owed is a form of bullying.
|
| Now, of course we can discuss if the law makes sense and is
| just, but that's another issue.
| bryanrasmussen wrote:
| >it is totally legal to pay more taxes than you owe, and you
| can even reclaim the money later if you need to. There is
| nothing preventing anyone from paying the taxes that they feel
| that they should owe, in excess of legal requirements.
|
| Gary Trudeau had a story about how he and his wife were always
| getting audited because they paid more taxes than people in
| their income bracket normally paid, so that would be one reason
| why you might not want to pay more than you have to.
|
| also if I thought I should pay more tax I would probably also
| think the other people like me should pay more tax and since I
| am probably in competition with them over things I would not
| like to disarm myself unless they were likewise disarmed.
| insta_anon wrote:
| > Unless you are a wage or salary earner, it is trivially easy
| to avoid having to pay taxes, at least in the USA. Same with
| the much lauded "inheritance tax" and even, to a lesser extent,
| sales taxes. It costs about 4000us a year to maintain the legal
| structures required to pay essentially no taxes, except sales
| taxes in some locations. In many cases, for lower levels of
| income, just having a small business can negate income tax
| burdens.
|
| If it is that easy and costs only $4000, would you mind
| describing the technique(s)? I can't believe that it would be
| simple / cheap / legal, because otherwise every business owner
| would do it?!
| vmception wrote:
| I think starting with that assumption is the primary
| disservice you are doing yourself.
|
| Its important to actually understand taxes so that you don't
| eventually assume that the tax collector / revenue service is
| an adversary. They are exuberant collaborators.
|
| Reading comprehension is key because even just imagining that
| rich people have an army of lawyers and accountants to figure
| it out is wrong. That takes way too much trust and those
| lawyers and accountants arent incentivized properly to figure
| things out. They have to be steered by the person that knows
| what they want and what ongoing compliance burdens they are
| willing to have, which requires already knowing or being part
| of a network of people that already have compliant systems
| set up and will tell. There are many more people that make
| wrong assumptions, to their detriment.
|
| Listing "the techniques" aren't useful, reading the tax code
| is. Read IRS codes from the 400s section (tax deferral
| accounts) and the 500s section (tax-exempt entities) as a
| start. That will boost your own search queries by using more
| useful terms to search.
|
| I sometimes find entire industries I was unaware of simply by
| being surprised by what the law says. The IRS has many
| parallel tax regimes that are different than the default one.
| You have to know to look behind door number 2 and door number
| 3, there are IRS agents sitting behind them bored and
| excitedly waiting to help you after you find them.
| tarr11 wrote:
| "RTFTaxCode" doesn't answer OP's question.
|
| What is the mechanism for paying $4000 and avoiding taxes?
| I assume some sort of trust? What are the details?
| vmception wrote:
| The IRS can grant tax exemption to any entity, even
| unincorporated ones that are a fiction of your
| imagination, for nearly free
|
| Convincing them to is what costs money, because
| unincorporated sole proprietorships and unincorporated
| general partnerships aren't convincing
|
| RTFTaxCode
| tyre wrote:
| Better advice might be to talk to an accountant and/or
| tax attorney. It's not exactly reasonable to expect
| someone to know enough about the tax code just from
| reading it.
| vmception wrote:
| Their answer will be "it depends, what do you want to do"
|
| You'll say "I don't want to pay taxes, I heard I can pay
| $4000 and not pay taxes"
|
| They'll say what I said "it depends on what you want to
| do and what compliance burdens you want to deal with"
| along with "where did you hear that, my retainer is
| $10,000 and hourly rates are $700 and $300 for the
| junior"
|
| and you still don't know what you want to do
|
| RTFTaxCode and find a service provider that specializes
| in that part of the tax code and then come back with
| specific queries about how those topics work
|
| This is more analogous to saying "go to a medical school
| professor and your dentist" as they are both doctors and
| one might be licensed to practice, when neither of them
| can actually help you, and your dentist says "the eye
| doctor specializes in this topic" but you hadn't quite
| figured that out yet and you really have to go to your
| primary care doctor first who will still be confused
| about whether that's the right recommendation for you
| because you can't articulate what you really want to do
|
| But since everyone that read this far is still here, and
| even more frustrated, I'll point out that 401ks are a
| whole industry that is simply a reference to subsection
| 401(k) of the IRS' 400 section and someone eventually
| noticed. There are other less used sections. 501(c)3
| which you also may have heard of in passing are simply a
| reference to that subsection of 500 section of which
| there are many other less mentioned sections. All of
| which may be more interesting to your specific goal.
| Scarblac wrote:
| I'm trying to understand how these things work.
|
| How does having the income in a business help? At some point
| you want to _do_ something with the money, and then you have to
| take it out of the company and it is taxed, isn 't it? Can that
| be avoided?
| dillondoyle wrote:
| The new pass through entity deductions are HUGE and lots of
| loopholes even if you're one of the consultant etc
| categories.
|
| also this year I could get a 1:1 _credit_ for time off for
| covid and covid supplies. Like not just lowering my taxable
| income.
|
| basic example traditional deduction take 10k off net income,
| if i'm taxed @20% saves me 2k. From what I could tell this
| was 10k off my tax bill.. like if i owed 20k it's now 10k.
|
| there's more too. i think car depreciation is better/doesn't
| exist if you buy personally but my car which is used for
| business is a tax benefit and pre-tax money I think.
| ISL wrote:
| The article is fairly thorough on this point. Among the
| available strategies is taking out loans against your shares,
| as ProPublica asserts Ellison and Musk have done.
|
| I'm surprised at the extent to which some people appear to
| have mortgaged their shares. Musk, in particular. The article
| suggests that he has placed ~$57B of his shares out of a (net
| worth of ~$151B) as collateral. If TSLA begins to fall, he
| may face one heck of a margin-call.
|
| You'll still have to pay at some point (basis step-up aside),
| but the bill can be deferred or, in the case of a decrease in
| share value, perhaps avoided to some extent.
| tetromino_ wrote:
| I still don't understand the scheme here. If you take out a
| loan against your shares, won't you have to pay back the
| loan (plus interest), which would still require you to
| eventually sell your shares and pay tax on capital gains?
| kypro wrote:
| Yes, but assuming your shares continue to appreciate at a
| faster rate than the interest you can defer any tax
| payments so far into the future that the amount becomes
| more and more insignificant due to economic inflation and
| capital appreciation.
|
| You're right that you still have to pay the tax, but you
| pay it on far more favourable terms than the average
| person. Of course the flip side of this is that the price
| of your shares collapse, but typically these secured
| loans are a fraction of an individuals net-worth and the
| risk is very low.
|
| Edit: I should add you can also time when you're taxed.
| So for example if taxes in the present are high you can
| wait then realise any profits when they're lower.
| Just1689 wrote:
| Not an American here but this could be related to the order
| in which things pay tax.
|
| If you receive 10K USD as income one month, you would pay tax
| on that and then be able to buy things
|
| If your business received 10K USD it could buy all sorts of
| things before declaring a profit and paying tax only on the
| profit.
| fastball wrote:
| Sure, but you can't just classify everything as a business
| expense.
|
| And regardless, that's not really a carve out for the
| wealthy, that's just a policy we have because we think it
| encourages business growth, which is generally a good
| thing.
| lelanthran wrote:
| > Sure, but you can't just classify everything as a
| business expense.
|
| If the business is buying it, then sure you can. There's
| limits on this for sole proprietors as the tax
| authorities will argue that the businessman who bought a
| yacht "for the business" only ever uses it for himself.
|
| But the rich folk, who have 20% of the company (the
| largest share, usually), can force the company to buy a
| yacht where use is limited to that single shareholder ...
| once again proving that the rich would pay less tax than
| the poor.
| llimos wrote:
| Ok, but why can't I use the same system for my income,
| and deduct my essentials like rent and power and water
| before I pay tax on the rest?
| sumtechguy wrote:
| Depends on how you structure it. It also depends on how
| much in assets you have (many people start with a heloc).
| As if the market takes a dip or long term low inflation
| you can end up stuck. You also have to be careful not to
| overleverage yourself. As you can end up borrowing to pay
| back another loan. It is why you see 'rich movie stare
| declarers bankruptcy'. It is not risk free. But with
| discipline you can do it. Also remember you can 'own'
| more than one company. Perhaps one company owns 5 houses
| which one of those you happen to live in...
|
| Find yourself an accountant. They will show you how to
| set it up. It is also usually decently complex enough to
| be a pain to do in the day to day running of it (hence
| the accountant).
|
| Also up above I said 'long term low inflation' can hurt?
| Look at what is going on and you can figure out why
| suddenly we have lots of it. Think about borrowing at
| 2-3% and inflation is 5%.
| sidlls wrote:
| That's covered under the "standard deduction" in US
| federal taxes. I'm not saying it's fair--that deduction
| doesn't really cover rent in most places--but that's the
| intent. Basically, you can't use the same system because
| the tax code is rigged in favor of the wealthy.
| hemantv wrote:
| Curious how do you setup this?
| md_ wrote:
| I think "I should pay more taxes" is generally understood as
| shorthand for "all people in my financial situation should pay
| more taxes."
|
| It's a bit like saying "I should be required to have fire
| protection", "I should be required to carry health insurance,"
| or "I should be required to use standard turn signals on the
| road."
| refurb wrote:
| Are you saying that people who say "i should be required to
| have fire protection, carry health insurance or use turn
| signals" should be able to _not_ do those things and not look
| like a hypocrit?
| solveit wrote:
| You're being obtuse. The point is that it's perfectly
| reasonable to be willing to pay more, but only if all the
| other rich people do too.
| pessimizer wrote:
| It's only reasonable in a competitive environment,
| outside of that, you have to actually _show your
| reasoning._ If we 're participants in a market that is
| designed to be fair, to say the rules should be changed
| for everyone in order for you not to take advantage of a
| loophole with negative effects but competitive advantage
| makes sense. It's saying that you're participating in a
| market that was designed incorrectly, and asking for the
| design to be corrected.
|
| To say you're going to keep dodging personal taxes until
| no one can dodge personal taxes is just dodging taxes.
| There's no market and no competition. Paying the taxes
| you think are ideal will just put you in the place you
| would be if taxes were how you think they should be.
| agent008t wrote:
| They could make a public pact?
| ericmay wrote:
| Why would you need others to do something you think you
| should do? Actually, how would anybody ever start doing
| that thing if everybody is waiting for someone else to do
| it first and that person too is waiting for others to do
| it first?
|
| "Tax me more" is just a publicity stunt and unfortunately
| it confuses people.
| md_ wrote:
| As I noted elsewhere in this thread, this is the nature
| of what are called "collective action problems."
|
| In effect, these are situations where coordinated
| collective action may be beneficial, but there is a
| disincentive to being the initiator of such an action.
|
| The examples I gave above were fireproofing your
| building, buying health insurance before you are sick,
| and mandatory turn signals on cars, but these abound in
| public policy: think, mandatory face mask wearing during
| a global pandemic in which masks which block the
| transmission of a disease _from_ an infected person are
| cheaper than masks which block the _infection_ of someone
| else.
|
| Regardless of where you come down on the ideological
| question--perhaps you think it's fundamentally immoral
| for governments to exist at all, which I can respect!--
| it's very simple economics that such problems (where the
| global optimal is only achieved if we ignore individual
| optimization) exist.
| ericmay wrote:
| And how are those collective action problems solved?
| md_ wrote:
| Typically, by government action, ideally as a result of a
| democratic process.
| ericmay wrote:
| So Warren Buffet and others should wait for the
| government to increase their tax rate and then they can
| pay more taxes? And this has to happen because if any one
| of them pays more taxes before the others they are at a
| disadvantage?
| md_ wrote:
| I think "at a disadvantage" may be the wrong framing. As
| a member of (say) the 1%, but not the 0.01%, my personal
| take is this:
|
| - My money does more good, dollar-for-dollar, by my own
| personal definition of "good", when I donate it to
| specific charities than when it's collected as tax and
| then spent.
|
| - We would nonetheless have a net benefit from more
| aggressive taxation of people like me because a) the
| reduced effectiveness, per dollar, is counterbalanced by
| increased overall spending, and b) more progressive
| taxation would help address inequality of wealth and
| income, which has other, independent, pernicious impacts.
|
| Because I believe those two things, I _both_ a) advocate
| for higher taxes on "people like me" _and_ b) to the
| extent legally possible, minimize my tax burden and
| prefer to make voluntary charitable contributions.
|
| I believe this last part is fully consistent with the
| first two bullet points if we take them axiomatically,
| though they each may of course be themselves wrong.
|
| Edit: I also want to add: I think when we talk policy, we
| often talk in a "if I were King of the World" sort of
| way. So, if I were King of the World, we'd raise tax
| rates but not spend the money on stuff I disagree with.
| ;) If you told me, "Yeah, we can raise the top income tax
| rate, but all the extra money will go to drone strikes
| against civilians," of _course_ I 'd oppose it. I think a
| lot of our "should dos" assume we get _other_ policy
| outcomes we desire as well.
| ericmay wrote:
| Thanks for explaining your viewpoint!
|
| I agree w.r.t king of the world.
|
| Let me summarize I guess. I just get annoyed when people
| like Warren Buffet go "oh if only they'd tax me more"
| when he's clearly in a position to pay more in taxes if
| he wants. I certainly empathize with the general social
| dilemma you outlined, of course, but in this case it just
| strikes me as marketing and it's very off-putting.
|
| I do think it would be neat if we could just get a
| receipt for our taxes. At least a general percentage
| showing what percent goes to what and an opportunity to
| drill down more into it if we wanted. Though it's a bit
| bizarre. I don't think I've paid enough in taxes to even
| buy a cruise missile... lol
| md_ wrote:
| I explained my thinking because I can _imagine_ it to
| also describe someone like Buffet's thinking.
|
| The top 0.1% have about 11% of the income in the US, or
| about $2Tn. So for someone like Buffet, a one-time
| contribution of half his net worth--which he has promised
| to do--is about $55Bn; an extra 1% effective taxation of
| the income of the 0.1% would be $200bn _per year_.
|
| So even if you're Buffett--and even if you're pledged to
| donate have of your personal wealth to charity--it's a
| pretty small amount compared to the ongoing returns from
| a small tax increase.
|
| I do strongly disagree with many of the things my tax
| money goes to, obviously. But I think this is where the
| "King of the World" thing comes in. ;)
| ericmay wrote:
| It seems to me that Warren Buffet can do both though. He
| can pay more in taxes by not taking deductions or just
| giving more to the government _and_ advocate for a higher
| rate. Lead by example.
| md_ wrote:
| For sure, but I assume his calculation may be similar to
| mine: that it's even _more_ optimal to advocate for a
| higher tax rate _and give his money directly to charities
| he chooses_ (which he has done, sort of, by pledging to
| give half his wealth to the Gates Foundation).
| ericmay wrote:
| Wouldn't it make sense to just pay more taxes and also
| give away money to charities?
|
| I mean, even if the tax rates are raised it's not like
| that money will universally (maybe not even majority) be
| applied to "good" programs... so once the tax rates are
| raised you're going to be funding more bombs and all that
| too. It's not going to just go to welfare (not using this
| term negatively) programs.
|
| It seems to me if you want to reduce wealth inequality
| you could do something like pay for a few people each
| month. Kind of like a patron. Why wait for a government
| program in which some of the money will be siphoned off
| for bloat, some of it will not actually go to the issue
| you want to address, and even so you won't have much of a
| say in how the money is spent in the first place?
|
| I actually run a non-profit. (Site is down at the moment
| b/c I didn't want to pay $300 for another year of Wix so
| I am going to redeploy it on S3 - where art thou time). I
| see a lot of other non-profits in my space who seem to be
| siphoning up money for not-so-great ideas and projects
| and general government contracts. Feels like nobody is
| really great at this stuff.
| md_ wrote:
| I may have been a little unclear. I'm typing this while
| in a meeting. ;)
|
| My point was that a rational actor might believe that
| _per dollar_ more good is done by the dollar being given
| directly to the charity of choice than to the government,
| but _also_ believe in raising tax rates overall (as a
| means to social goods).
|
| As a result, the actor should rationally prefer to give
| as much of their money as possible directly to the
| charity and _not_ to taxes even while arguing for
| elevated taxes.
| ericmay wrote:
| Hey me too! :)
|
| I think the overall issue is that what I personally think
| someone should do is that if they believe in paying
| higher taxes, it shouldn't matter what anybody else does,
| they should just pay higher taxes or even spend money to
| lobby for higher taxes via campaign contributions,
| lobbyists, etc.
|
| It just seems like mental gymnastics that some wealthy
| people use to avoid feeling bad that there are poor
| people by _saying_ if only they raised taxes you 'd pay
| more while also not paying more. Of course you'd pay more
| if taxes were raised, except in the case where taxes
| _were_ raised and then you found loopholes or deductions
| to not pay them... It 's just a way to convince yourself
| to have your cake and eat it too.
|
| But even if taxes weren't raised, why can't you self-fund
| social programs? Even at a very basic level - food
| stamps. You could just offset how much you think you
| should pay in additional taxes by donating to food
| pantries or just buying people groceries. You don't need
| the government to do that. You could make a huge impact
| in your own community. We all could!
|
| Some of my friends and friends of friends got stimulus
| money when that first stimulus came around. Based on the
| previous year's tax returns we received a couple hundred
| bucks or something. I don't remember exactly. Could have
| used the money for something? Sure. We could have taken
| the money and bought something we felt like buying, then
| went online and said it was a terrible thing that others
| didn't get enough money and we were getting money. We
| could have went and did what my friends did and buy new
| GPUs or something. No. We just turned right around and
| donated it to the Mid-Ohio Foodbank. They all went on
| about how they didn't need the money (obviously) and that
| it was sad people were losing their jobs and on lockdown
| and all of that and that the government should do
| something. Like.. why don't _you_ do something? Take that
| $1,000 you got and turn around and give it to someone who
| needs it.
|
| Please don't take that personally or anything - I'm
| exploring this with the aim of a good discussion. I'm not
| quite as well off as you but we do very well for
| ourselves and probably need to donate more money anyway.
| It just always drives me up the wall when Bill Gates or
| Warren Buffet come out and say they should pay more
| taxes... they can just do that. They don't need anyone
| else to. Am I more moral or more of a leader than they
| are? I highly doubt it. So what's left? Game theory? Or
| maybe they just want to craft a persona? Idk. I don't
| mind that people are wealthy. We certainly are depending
| on who we are being compared to, but I just feel like
| people are being dishonest with themselves and others on
| this particular topic, even if it's not intentional.
| md_ wrote:
| Don't worry. I'm not at all offended. It's a good faith
| discussion. :)
|
| I think I agree more than I disagree. A few points:
|
| 1. Note that Buffet and Gates have both pledged to give
| half their wealth to charity in their lifetimes. Is your
| concern that half is too little, that it's charity and
| not taxes, or something else?
|
| 2. For me personally, quite frankly, I absolutely
| struggle with the question of how much I should give. I
| could afford to give more than I do without impacting my
| lifestyle, and while I don't live high on the hog maybe
| my lifestyle _should_ be impacted. I struggle with this,
| because there's no obvious answer--if you're lucky enough
| to have disposable income, you can _always_ afford to
| give a little more, no?
|
| My personal view is that what I save now will go to
| charity when I (and my partner) die, so I don't worry too
| much about it--I'm sure at that point the need will be as
| great as it is now. But I do think these are difficult
| questions, and I would certainly forgive anyone for
| having no pat answer to them.
|
| Then again, there's always the question of extremes. A la
| Peter Singer (I think), should I donate a kidney to a
| stranger? For me, utilitarianism says yes, but I just
| can't bring myself to do that.
|
| So is it possible I'm being less than fully rational and
| some of this is guilt assuaging? Yeah, I think so. But
| anyone as lucky as we are who doesn't feel a bit of,
| well, if not guilt, then _somehow_ conflicted about it is
| someone I really wonder about.
| gmadsen wrote:
| yes? Game theoretic, it is advantageous for the
| collective if everyone adopted the strategy, but for a
| single player, it is extremely disadvantage
| ericmay wrote:
| So people should stop hanging guillotines outside of Jeff
| Bezos's house? He's just following game theoretic
| strategy after all.
| gmadsen wrote:
| Thats a different game. I'm sure he does evaluate the
| peasant aggregate animosity toward him versus his
| competition to other elites.
| rcMgD2BwE72F wrote:
| Another way to frame this: if I'm a millionaire and want
| all millionaires to pay more tax (including me), paying
| more tax without trying to get others to do so could
| allow other millionaires to spend their tax savings to
| lobby against higher taxes. I may not want to sacrifice
| myself nor do I want to pay more tax for myself, but
| simply want a fairer system. A society is more than the
| sum of individuals, obviously.
| md_ wrote:
| Yes, exactly.
|
| As a trivial example, it's perfectly rational to say, "I
| should be required to carry health insurance, because
| universal insuring would lower the premiums for everyone,
| _but I will not do so until then because the premiums are
| too high_. "
|
| As a less trivial example that perhaps engages more with
| what I think your argument is, one can also argue,
| "Collisions between two SUVs have a higher rate of serious
| injuries than collisions between two sedans, but in a
| collision between an SUV and a sedan the sedan has an even
| higher serious injury rate. Ergo, because all of my fellow
| commuters drive SUVs, I am also driving an SUV, _but I
| believe SUVs should be outlawed_. " (I've borrowed this
| example from an old James Surowiecki column:
| https://www.newyorker.com/magazine/2007/07/23/fuel-for-
| thoug....)
|
| Irrespective of whether these are good policies for other
| reasons--perhaps we believe it's too much of an
| infringement upon individual liberty to ban driving SUVs!--
| it is not inherently hypocritical to not voluntarily take
| part in an activity which one believes has positive
| external value _only if universally partaken_.
|
| Quite frankly, this is a trivial point, yet it's often lost
| in somewhat silly accusations of hypocrisy, which I think
| is really disappointing.
| gadders wrote:
| Isn't that an easy statement to make? Especially as they know
| the chances of it happening are low.
| tyre wrote:
| I advocate for higher taxes on myself and others in my
| position. I vote that way. I worked on a presidential
| campaign that focused heavily on economic policy and social
| programs, all of which involved raising taxes.
|
| It's not a secret that one party in the United States wants
| to raise taxes on higher earners, which includes many in
| Silicon Valley.
| sneak wrote:
| Why do you believe that maximizing USG revenue is a net
| societal benefit?
| 29athrowaway wrote:
| A better way to structure the article would be:
|
| - explain how much tax evasion took place
|
| - explain how the tax evasion happens
|
| - who is doing it
|
| - what to do next.
|
| Only then, compare the situation to the average person. Everyone
| knows how much they pay in taxes themselves.
|
| This video does a better job at explaining the tax loophole:
|
| https://www.youtube.com/watch?v=8pBPZMUcsh0
| Havoc wrote:
| These low % media likes kinda only tell half the story because it
| ignores the fact that it's largely a deferral rather than
| avoidance. e.g.
|
| >Those gains are not defined by U.S. laws as taxable income
| unless and until the billionaires sell.
|
| This isn't some evil billionaire trick. Anyone can load up
| Robinhood, buy some shares, not sell and they too can achieve
| this 0% tax paid miracle. Mostly because the 0% is a complete
| misrepresentation of what's happening. It's counting the gains
| now, and ignoring the tax you'll be paying later. And that's true
| for billionaire and man on the street.
|
| The difference comes down largely to the extent to which wealth
| drives options available. Buffett doesn't need to sell shares
| because his car broke down or to put food on the table at month
| end. i.e. Largely an inequality issue granting those with wealth
| way more options & control over actions and thus the resulting
| tax outcomes.
|
| Doesn't change the outcome - working class pays
| disproportionately, but that imo is a wider and more serious
| inequality issue. One that isn't helped by noise from "evil
| billionaire tax dodger" articles like these
| ip26 wrote:
| I can't find the quote now, but I heard something before along
| the lines of _" a tax deferred is a tax avoided"_ as a
| principal for business. I'm not the wealth class, but at the
| time I understood the idea was if you can kick the can down the
| road indefinitely through a never-ending stream of tactics, you
| can carry on with things & never actually pay taxes. In theory
| you have not escaped them... but in practice you have.
|
| Like-kind exchanges are a good example. You can defer taxes on
| the basis of your rental properties for your entire life (and
| then your children can enjoy a step up in basis)
| Havoc wrote:
| > "a tax deferred is a tax avoided"
|
| Once you get into more complicated tax structuring then yes
| you can defer it for very long. The extent to which that very
| long becomes indefinite depends largely on the country's tax
| laws. Some are more open to the concept of handing down
| wealth through the generations than others.
|
| Deferral opportunities are available to more normal people
| too. As per your rental example. Or self managed pensions in
| some countries etc. Or tax wrappers for stocks. Either people
| don't know enough or they've get their hands forced by
| paycheque to paycheque realities.
|
| The only stuff really out of reach for normal people is
| genuine offshore stuff. The overheads on that are quite
| chunky so you need millions for it to make sense.
| cletus wrote:
| There's lot of detail here. I wasn't really surprised at
| anything. Of course this is going to be a game of whack-a-mole
| but arguing they'll just avoid it in the end is no reason not to
| try.
|
| I'd focus on three areas to begin with:
|
| 1. Property taxes. They're simply too low on ultra high end
| property. A $100m condo in Manhattan only pays about 10-14x the
| property tax that a $1m condo does. Additionally, property taxes
| should be significantly higher if the property is owned by a
| corporation/LLC;
|
| 2. Debt. In the era of zero interest rates, the ultra-rich borrow
| money at near zero cost rather than repatriate money they would
| then have to pay taxes on. The worst case here is that they're
| deferring taxes indefinitely. This should apply to companies too.
|
| 3. Withholding taxes. Pretty much any asset sale not associated
| with an SSN should have taxes withheld at source by the holding
| institution. We have some of this already. We need more of it.
|
| One final point about dividends. This system actually needs to be
| reformed and it's bizarre to me how easy this is and that no one
| in America seems to see it.
|
| Currently, if a company makes a profit they pay corporate taxes
| on that profit. If they then pay a dividend it counts as income
| and that person then pays taxes on it again. This particularly
| hurts smaller businesses and was a big motivation for the
| complicated passthrough rules introduced in the Trump tax "cuts".
|
| In Australia, we have a system of franking credits. IIRC the
| corporate tax rate is 30%. If a company makes a profit of $10,000
| they pay $3,000 in taxes. The company then decides to distribute
| those profits to shareholders as a dividend. So if you own 10% of
| that company you receive $700 as a dividend. But you also get a
| tax credit of $300 (being 10% of the $3,000).
|
| That means that when you do your annual personal return, if your
| marginal tax rate is <30% you'll get a partial refund. If it's
| >30% you'll need to pay a little more.
|
| These are called "franking credits" and in this example the
| dividend is "fully franked". There are partially franked and
| unfranked dividends but they are uncommon.
|
| This completely solves the double taxation of dividends problems
| and I don't understand why we're doing crap like passthrough
| entity allowances to work around it.
| Proven wrote:
| I'm happy for them, at least somebody manages to avoid taxes.
|
| Shame on Pro Publica for conducting and publicizing anti-public
| research, by the way. Involuntary taxation is a crime against the
| people.
| adolph wrote:
| Theory: there is an equilibrium between cost of tax and cost of
| tax avoidance. Some of the tax avoidance costs are amortized over
| a broader time period than any particular tax and this requires
| the provision of specialist knowledge and skills. Once a tax
| avoidance service provider is engaged there is an incentive for
| the provider to go after remaining tax even if the avoidance to
| tax cost ratio is not as favorable as the base reason to engage
| the provider. The result of this is that once the avoidance to
| tax threshold is passed there is an larger affect on tax payments
| than the arithmetic amount of tax over the initial threshold.
| temp10298385 wrote:
| Seems that the most common retort in this thread is to hammer
| down on the principle that unrealised gains should not be taxed.
|
| This is directly addressed in the article. Unrealised gains can
| still work as collateral for loans. The spending habits appear as
| if your unrealised gains were bonafide income. At what point does
| the distinction between wealth and income become arbitrary?
|
| There seems to be a large amount of "missing the point" in this
| thread. As a wage labourer my wealth growth is significantly
| hampered by taxation. For the small group of people with net
| worth tied up in financial assets, taxation doesn't slow their
| growth in any meaningful capacity. If we ignore any ideological
| predispositions and instead simply ask what limit this system is
| approaching I think the answer seems terrifying.
|
| A common sentiment here is that inequality is not a problem in
| and of itself. "How does Bezos wealth possibly impact me?".
| Having seen the difference in equality in Scandinavia, USA, and
| South Africa I would beg to differ. Inequality eats at a society
| at all levels. The rich I met in America seemed less happy than
| the poor in Sweden. In South Africa even more so.
| somethingAlex wrote:
| Could you explain what you mean by inequality eats at society
| at all levels?
|
| Obviously if inequality gets to a certain point, where you
| don't have a solid middle class anymore - that's problematic.
| I'm just curious about your stance because I too feel like Jeff
| being rich doesn't really make my life any worse.
| temp10298385 wrote:
| It erodes social cohesion. When I went to elementary school
| in Sweden I shared a classroom with both a child that came to
| our country has a refugee and another whose parent sat in
| parliament. Different social classes intermingled frequently.
| While there are clear class divisions in Sweden, the
| distances are not so great. There is a sense of security that
| comes with a more equal society that I think can't be
| replicated by any other means. I think that once you've lived
| in a fairly equal society, though Scandinavia does have its
| shortcomings, it is hard to excuse inequality.
|
| How does Bezos harm you? I don't want to put the blame
| squarely on his shoulders but I would like to point out an
| apparent dynamic. When a class of people are decoupled from
| the issues the majority faces the outcome is resentment.
| Recordbreaking growth for billionaires while many are
| suffering their most trying year to date is creating tension.
|
| There is definitely a narrative that can explain why Bezos
| fortune is rightfully his down to the last cent and why he is
| a net positive in this world. And it wouldn't necessarily be
| incorrect. However you can't avoid the fact that his wealth
| is manifasted as unaccountable power. A society plagued by
| unaccountable power, which is what I believe that inequality
| ultimately is, is not healthy.
| dredmorbius wrote:
| There are a number of arguments, most are too extensive to
| fit concisely in an HN comment. Pointers to some might be
| useful.
|
| At the extreme you have the "utility monster" or "freedom
| monster" problem. Existential Comics explores both
| graphically and entertainingly:
|
| https://existentialcomics.com/comic/8
|
| https://existentialcomics.com/comic/259
|
| Much of Adam Smith's _Wealth of Nations_ actually addresses
| the issues of inequality and the dynamic between wealth and
| power: "Wealth, as Mr Hobbes says, is power." That's one of
| the shortest and most direct sentences in a book given to
| long and complex writing.
|
| _The Spirit Level_ is a book-length exploration of the
| problems of inequality and highly-unequal societies.
|
| https://en.wikipedia.org/wiki/The_Spirit_Level_(book)
|
| https://www.worldcat.org/title/spirit-level-why-equality-
| is-...
|
| Thomas Picketty's works ( _Capital in the Twenty-First
| Century_ and _Capital and Ideology_ ) fit into this
| discussion.
|
| Oxfam have a set of suggestions as well, notably Branko
| Milanovic's _The Haves and the Have-Nots_ :
|
| https://politicsofpoverty.oxfamamerica.org/three-must-
| read-b...
| kristjansson wrote:
| > At what point does the distinction between wealth and income
| become arbitrary?
|
| I think risk is the difference. Someone invested (esp. heavily
| in one name) who borrows against that holding to finance
| consumption is basically adding leverage to their position,
| increasing their risk in order to continue growing their
| investment. Since growth is a social good, that's incentivized.
| It becomes income when you take your chips off the table i.e.
| making that capital entirely private instead of investing
| alongside others.
|
| The risk is less apparently in TFA since it, you know, focuses
| on 25 of the absolute wealthiest people in the world, any one
| of whom can finance any sort of consumption short of becoming a
| nation-state without impacting their position, borrowing or
| selling.
|
| Whether _wealth_ inequality is so undesirable that it should be
| ameliorated even at the expense of growth is a policy
| conversation worth having, but equating change in wealth to
| income and arguing _income_ inequality doesn't really hold
| water, esp. for wealth primarily invested in public names
| temp10298385 wrote:
| To clarify the intent of my original content, I'm referring
| to wealth vs income with regards to the obscenely wealthy. As
| you've pointed out, risk is generally very low for
| billionaires. The ELOCs that they utilize for credit have
| very generous terms as the sheer amount of assets all but
| guarantee that the debt can be serviced.
|
| What I'm trying to get at is that while the distinction of
| wealth and income is very palpable for wage earners such as
| myself, it is less so for billionaires. Throughout my life my
| wealth will consist mostly of my primary residence and
| retirement portfolio. I can't really use that for my day to
| day consumption. But if a billionaire can get an ELOC against
| a portion of their stock portfolio and use it to purchase
| yachts, cars and whatever tickles their fancy then their
| wealth enables behaviour that renders the lack of liquidity
| irrelevant.
| pachun wrote:
| More on this if you have a WSJ subscription:
|
| https://www.wsj.com/articles/irs-is-investigating-release-of...
| goinfar wrote:
| Even more striking would be to compare wealth growth of average
| wage earners vs. lifetime politicians.
| drobert wrote:
| In the video attached to the article they mention the rich loan
| money and live off that. They don't explain how they are paying
| that loan.
|
| https://youtu.be/8pBPZMUcsh0
|
| I felt the article was not very inspiring since it emphasised the
| tax the rich pay in relation to their wealth not their income.
| Which is irrelevant. Of course they are not going to spend all
| their wealth and pay tax on it.
| hemantv wrote:
| Thanks for sharing. Give me extra motivation to learn about these
| and do better plans for future.
|
| As much as people want to cry about it, nothing will change on
| ground. Too much money at stakes.
|
| Also people forget these were incentives for people to start
| companies, because of this US is leader in global technology.
| China will really appreciated if you guys take away these
| incentive so they have most enterprise people which in turn make
| them Global leader in technology.
| hallqv wrote:
| As many poster already pointed out the article is absolute
| rubbish due to conflation of wealth gain with income. Would love
| to get my hands on the actual IRS data though. Any ideas?
| hasbot wrote:
| What would you do with it?
| breck wrote:
| 1. Great scoop. It would be nice if we didn't have this issue but
| we have it and so this is an important dataset.
|
| 2. I like Buffett's response
| (https://www.documentcloud.org/documents/20798866-buffett-sta...)
|
| 3. I don't see a model on how changing tax policy will fix
| anything. My stance is we need to give people _Intellectual
| Freedom_ , that is, the right to reshare ideas, and repeal
| Intellectual Slavery laws (copyrights and patents), which are
| both chains on the poor and gravity for the rich.
|
| 4. That being said, it would be nice if we removed unnecessary
| complexity from the tax system. I have a way.
| Xcelerate wrote:
| I'm not sure why this is considered some giant revelation. Anyone
| who owns and holds stocks that do not pay dividends is aware that
| you only pay capital gains taxes when you sell. Why is this a
| surprise?
|
| I'm not against heavily revising the tax code, but I'm not sure a
| wealth tax is the way to do it. I'd rather we tax the utility of
| money rather than the quantity (e.g., a billionaire who spends
| millions on cancer research will not have that money taxed, but
| one who spends millions on yachts and super cars will pay 90%
| tax). Society could then vote to determine what things should
| have high and low taxes.
| cpursley wrote:
| I think replacing income tax with a progressive consumption tax
| is something worth considering (or at least modeling out).
| Currently the bottom half of W2 earners in the US don't pay any
| income tax and the wealthiest only pay capital gains.
|
| It doesn't seem fair that the upper middle income earners carry
| so much if the tax burden (at least as a percentage of their
| wealth). We also need to get away from the idea of taxation "as
| punishment" and think about it in terms of "what does funding
| the system actually require".
| seunosewa wrote:
| No one type of tax is the best. The key to effective taxation
| is to have many different kinds of tax so that there's no way
| for the rich to avoid paying any taxes at all by reorganizing
| their financial affairs. So if you avoid one kind of tax,
| then you'll have to pay more of a different kind of tax. So a
| progressive consumption tax is perhaps a great addition to
| income tax, not a substitute.
| someguydave wrote:
| are you interested in minimizing economic distortion or
| punishing rich people?
| throwaway0a5e wrote:
| > The key to effective taxation is to have many different
| kinds of tax so that there's no way for the rich to avoid
| paying any taxes at all by reorganizing their financial
| affairs.
|
| Or just tax less to increase the wealth floor where
| avoiding it becomes useful thereby decreasing the number of
| people who do it thereby reducing the losses. You're
| basically reducing amplitude of the tax curve in order to
| capture a wider range. The billionaires may be stupid rich
| but there's so few of them they make up a negligible
| percent of public coffers.
|
| Nobody bothers registering their car out of state to save a
| $50 fee. Nobody bothers putting their house in a trust to
| save a couple thousand in taxes. Not hard to extrapolate
| from there.
| rvba wrote:
| You omit the fact that billionaires supposedly never realize
| their gains, yet they somehow are able to afford mansions and
| planes (not company owned). The gains are realized, but due to
| various loopholes untaxed diaposable cash is created.
|
| How does this happen and why is it legal?
|
| Obviously there are ways (e.g. borrowing money against stock) -
| but maybe this should be closed?
|
| If you are a regular person your wages are taxed and then you
| build a house using taxed materials. If you are rich you borrow
| money against shares to a trust in a tax haven and then that
| trust builds a home for you as a company (so not even tax on
| materials) and you get an untaxed home where you can live.
| paul_f wrote:
| Not sure we can make borrowing money illegal. For example, is
| it OK to have a second mortgage backed by the equity in your
| home?
| Frost1x wrote:
| Definitely the significant difference. It's not just that the
| ultra wealthy can stash money in these sort of asset havens
| and avoid taxes, it's that they can somehow use them as
| liquid as cash.
|
| Your average person may have access to some of the asset
| storage options, like wealth stored in their 401k or even
| purchasing stocks directly. What we can't do is use those
| assets as if they're money in a bank account and avoid tax. I
| can lower my income by stashing money in my 401k and defer
| taxes until I retire but when I retire, I will pay taxes and
| between now and then, those assets can't be touched for much
| beyond an emergency without incurring fees, taxes, etc.
|
| Wealth is very different than income but if wealth can be
| utilized just like income (liquidated) yet not taxed,
| something is off in the tax system and this is what people
| get cranky about. If the assets weren't as liquid and usable
| in place of cash and had to be tucked away or otherwise
| taxed, less people would be cranky.
|
| For all intents and purposes for the ultra wealthy, that
| wealth is readily accessible, well above the amount of money
| they could need or most could even want which people equate
| to their income. They might not quickly liquidate their
| entire estate but they can liquidate or borrow against large
| enough portions that they can do about anything they want.
| Xcelerate wrote:
| I'm confused how using their assets to borrow against lets
| them avoid taxes. If they borrow $10M for a yacht, they
| still have to presumably back that money back at some point
| to whomever they borrowed from. And to get that money from
| their assets, they will have to pay capital gains taxes on
| it. What am I missing?
| Sargos wrote:
| The loan is paid for by the appreciation of the backing
| asset. And over the long term the depreciation of the
| dollar.
| danans wrote:
| > The gains are realized, but due to various loopholes
| untaxed diaposable cash is created. How does this happen and
| why is it legal?
|
| I'm sure there are loopholes, but at some level it also
| demonstrates how stupendously wealthy the super rich are that
| financing their lifestyles (i.e. houses) often requires a
| tiny fraction of their overall wealth.
| tsuru wrote:
| From the American perspective, they still have too much to
| spend on corrupting politics and justice hiding behind
| "spending money is free speech." There needs to be a 90% tax
| bracket and we should subject capital gains to normal tax
| brackets if percentage of gross income is, say, 50% or higher.
| This makes more sense to me versus total wealth tax. Also
| reinstate a meaningful inheritance tax (aristocracy-prevention
| tax)
| taurath wrote:
| The lack of a wealth tax means they just get to pick and
| choose when they take their income out of their assets,
| always at the most favorable time. Capital gains going up
| wouldn't make much of a dent in someone paying under 5%.
| tomrod wrote:
| Right, this is a benefit of ownership is having control of
| how an asset is used.
| [deleted]
| willj wrote:
| Taxing a quantity is way simpler to implement, and maybe more
| effective, than making a huge list of items to tax, thereby
| creating loopholes.
| endymi0n wrote:
| This.
|
| > yachts and super cars will pay 90% tax
|
| Oh really? But car parts are just 20% so let's just cut the
| Veyron in half before delivery. And the yacht is better
| privately rented from that Serbian shell company whose
| business model it is to just own one boat and rent it to a
| single person.
|
| Rich people are smart and greedy. And if they aren't, so are
| their tax advisors.
|
| There is a massive case for simplicity in tax code, even if
| it does not fit perfectly.
|
| Minimum gloval tax, revenue tax, Tobin tax, high inheritance
| tax (with significant tax free minimums) and a land value tax
| would be way harder to cheat and easier to implement.
| ericmay wrote:
| The only one you can't actually cheat is property tax. The
| government can send someone there and seize the asset.
| Everything else can be avoided or fought.
|
| I think what we are seeing is the beginning of the slow
| destruction of the nation state which was built to fight
| existential and total wars. The only thing higher tax rates
| are going to do is push wealth out of some countries and
| into others, unfortunately. Why doesn't the U.S. just
| invade the Bahamas and stop tax avoidance? Once you realize
| why, you'll realize that just taxing more won't work.
|
| Whether we like it or not, I think the standing down of the
| nation state from wars in the past is going to lead to a
| collapse of welfare states and social programs (I don't use
| these terms negatively so don't assume I'm "against" these
| programs), and continued fragmentation of large national
| and international organizations. Some people are very happy
| with their nation (Norway or Switzerland or something),
| others aren't (United States, China). Those who aren't are
| going to move their wealth to somewhere that is
| advantageous to them. Even China doesn't stop this. Wonder
| why housing prices are so high in Vancouver?
|
| Most people for most of history haven't lived in anything
| approaching a nation state. It's a new thing, and it is
| likely in my view to be temporary. It's hard for us to see
| because it's what we were born into and our perspectives
| are short term.
| dredmorbius wrote:
| A land tax (a special case of a property tax) is probably
| among the more avoidance-resistant taxes. There should be
| numerous others which might exist, particularly in
| regulated financial industries.
| thow-01187 wrote:
| What about the following proposition - any publicly
| traded company must issue, every calendar year, new
| shares worth of 2% of the total shares outstanding, and
| transfer them to the tax office.
|
| That's essentially a 2% wealth tax on the stock market,
| borne equally by all shareholders, regardless of their
| residence. Maybe I'm just naive, but I don't see any
| accounting magic to avoid such a tax.
|
| But then again - there's one agenda that unites left and
| right across the developed world - no wealth taxes.
| ericmay wrote:
| The tax office where? In the United States? Maybe
| companies would just stop "going public" or would become
| publicly traded in another jurisdiction. Or maybe France
| doesn't like that China says French companies have to
| issue 2% per year in new shares to operate in China. Or
| better yet, how do you do this in all countries? Is it
| 2%/year in all countries?
|
| Etc. I think there are a lot of scenarios to think
| through.
|
| -edit-
|
| Didn't downvote you BTW. Shame on those who are when
| you're just having a discussion. We really need to get
| rid of that as a tool.
| RyanHamilton wrote:
| Interesting points. Can you provide a definition of your
| nation state?
| ericmay wrote:
| I'd just say you can think of it in colloquial terms.
| China is a nation state, as is France, Germany, Russia,
| Venezuela, etc. Some are looser than others, some are
| stronger. Along these lines I think ethnicity and
| homogeneity play a part but not always.
|
| There's some room for argument about who and what are
| nation states - does the Bahamas qualify as a nation
| state or just a convenient government? Are some countries
| stronger nation states? What's the difference between
| countries and nation states? Is there one? There are
| probably some items to explore there for me too.
|
| Maybe there's something you have in mind you want to
| discuss with respect to the concept of the nation state?
| danielh wrote:
| This might come as a surprise to folks who do not own stocks
| and are not aware of the difference between income and
| (unrealized) capital gains. According to this article [1] from
| 2020, about half of American families owned stocks. But only
| 14% own stocks directly, the rest is through retirement
| accounts.
|
| The media does their part with sensationalist headlines like
| "Jeff Bezos got 100B richer during the pandemic". Without some
| financial literacy, someone might interpret this that someone
| handed Jeff Bezos a 100B paycheck.
|
| [1]
| https://www.forbes.com/sites/teresaghilarducci/2020/08/31/mo...
| koolba wrote:
| The same outlets that publish those headlines also publish
| ones like " _Company XYZ made billions in revenue and paid
| zero in taxes_ ", completely glossing over payroll tax,
| deferred losses, and credits for capital investment.
| taneq wrote:
| This one makes me so mad, because it's always some
| ignoramus comparing taxes with revenue and ignoring the
| fact that if the company paid zero taxes then most or all
| of that revenue was ploughed back into the local economy.
| Jobs, construction, equipment, etc. all mean that cash
| lands on everyone, and then people swallow the spin and
| complain about it.
|
| Now, if they were making billions in _profit_ and paying
| zero taxes then that 's different.
| perryizgr8 wrote:
| > Now, if they were making billions in profit and paying
| zero taxes then that's different.
|
| Why is that different? Profits will be used to innovate
| or be invested in future infrastructure, at which time
| they will be taxed.
| ansible wrote:
| > _Now, if they were making billions in profit and paying
| zero taxes then that 's different._
|
| Some companies are, and are very clever in hiding that
| (offshoring profits, etc.).
|
| Other companies (and their boards apparently) are content
| with "merely" overcompensating their executives, who then
| have their own teams of accountants and lawyers to avoid
| paying taxes. The companies themselves aren't running
| much profit, on the promise of a better stock price and
| future growth. In some cases this is legitimate because
| they are indeed investing in their own infrastructure or
| intellectual property.
| bjourne wrote:
| Payroll tax is paid by employers _on behalf of_ their
| employees. That is, it is the employees money that pays the
| tax - not the employers. VAT works similarly.
| koolba wrote:
| There's two halves to payroll tax. One paid by the
| employee that is deducted from their paycheck. The other
| is paid by the employer and counts as an expense against
| revenue.
|
| Employees do not get to deduct the second half from their
| taxes. It's considered to be paid by their employers.
|
| (Unless you're self employed.)
| metabagel wrote:
| Nonetheless, it's effectively part of the employee
| compensation. It goes away if the employee does.
| taurath wrote:
| I think wealth coffers are past the upper limit of what can
| be construed as reasonable even in the most anarchic of
| capitalist societies.
|
| Just like on the monopoly board, one cannot win when all the
| spaces are already owned - that's the situation we
| fundamentally have. A wealth tax is necessary.
| specialist wrote:
| Yes, and:
|
| The never ending struggle between wealth and democracy.
| Same as it ever was, including the pearl clutching and
| feinting spells.
|
| This was my introduction to the nuts and bolts, written by
| Kevin Phillips, Reagan's economist:
|
| Wealth and Democracy: A Political History of the American
| Rich [2003] https://www.amazon.com/Wealth-Democracy-
| Political-History-Am...
| theevilsharpie wrote:
| > Just like on the monopoly board, one cannot win when all
| the spaces are already owned - that's the situation we
| fundamentally have.
|
| Monopoly has a fixed game board with no possible means of
| expanding or changing the spaces the player can land on.
| The real world is constantly at risk of disruption from
| changes in technology and geopolitics that can
| substantially change the competitive landscape.
| bjourne wrote:
| That doesn't work out in practice. "The richest families
| in Florence in 1427 are still the richest families in
| Florence" https://qz.com/694340/the-richest-families-in-
| florence-in-14... The headline tells you what you need to
| know. The disruption thing is just a chimera to fool
| gullible people into thinking that rich people actually
| earned what they got and that the system is fair. It
| absolutely is not.
| kansface wrote:
| The richest families in the US are certainly not the
| richest ones from 1950 let alone 1427. The largest
| companies by market cap are Apple, MS, Google, Amazon,
| and FB... None of those businesses existed a generation
| ago let alone the technology that powers them or even
| their business models. At least some of the founders of
| those companies are immigrants. There is no reasonable
| extrapolation from wealthy families in Florence to
| "disruption is just a chimera to fool the gullible" in
| SV.
| bjourne wrote:
| The three richest families in the US are (according to a
| simple Google search) the Waltons, Kochs, and the Mars.
| These three families were already in the 1950 very
| wealthy. I don't know enough to say whether they were
| among the _richest_ , but for sure they weren't poor.
| ex_amazon_sde wrote:
| > The real world is constantly at risk of disruption
|
| Only for workers being replaced by automation and such.
| For whole social classes - no.
|
| All key indicators show how social mobility is not high
| in most countries and it's even decreasing in many.
| taurath wrote:
| True, in monopoly those with nothing aren't allowed to
| take back the means of production by force when all
| changes create further and further wealth inequality.
| OJFord wrote:
| And it's worse than just 'assets not cash' - Amazon might not
| be the _best_ example, but even so there 's no way can dump
| ~1/10th of it without moving the price; even ignoring
| disclosure requirements and the effects of insider selling,
| it'd be way down just on that volume (10x 30d average).
| throwaway0a5e wrote:
| > Without some financial literacy, someone might interpret
| this that someone handed Jeff Bezos a 100B paycheck.
|
| Which is exactly the reaction those kinds of headlines are
| fishing for.
|
| A 100b check is very different than your already massive
| business booming more and making you richer because you own a
| huge share of it and that share is now worth more.
| danielh wrote:
| > Which is exactly the reaction those kinds of headlines
| are fishing for.
|
| Not sure I get your point. Do you want to imply that 100B
| in capital gains would be preferable over a 100B paycheck?
| RyanHamilton wrote:
| They seem to be suggesting it's better the money is
| earned through ownership. Which is funny as I'd lean the
| other way and say that beyond a point, allowing such
| large income through ownership and not actual work is a
| bad idea.
|
| Note: Bezos and Musk, could ask for a hefty salary so
| they may work out to similar total income, unless someone
| else could run it cheaper and better. While hedge funds
| and inherited wealth that only own and don't contribute
| would receive less.
| metabagel wrote:
| I think you're missing the point of the article. Everyone
| here understands that unrealized capital gains aren't taxed.
| That's what the article is about. It's saying, "look, this is
| the result of the tax policy" - staggering gains in wealth
| with essentially negligible tax burden. It seems unfair,
| because it is unfair.
|
| So, we all understand it, but maybe some of us think that
| because it is, it must be. I've never understood that point
| of view.
| DoreenMichele wrote:
| _I'm not sure why this is considered some giant revelation._
|
| The very first paragraph:
|
| _ProPublica is a nonprofit newsroom that investigates abuses
| of power. The Secret IRS Files is an ongoing reporting
| project._
|
| (Among other things) "News" tends to be _bad news_. This is a
| well known fact and if you try to google up studies on news and
| mental health, it will likely auto-complete (or auto-suggest) a
| phrase for you.
|
| Not to say it isn't a valid criticism and not to suggest it's
| in any way untrue, but among other things, I have had a class
| in journalism and I'm a writer by trade and recent years have
| been very hard on traditional news outlets. The competition for
| eyeballs is really fierce and lots of publications are
| struggling to survive or outright going under, much to the
| detriment of the quality of journalistic writing you can find
| today.
|
| Writers are being paid less in real terms. They can't do the
| kind of research they used to do. Etc.
| sslayer wrote:
| No way that would be manipulated and abused by the politicians
| and the wealthy. I think at some point we have to accept that
| people are going to game any system (on all sides and angles).
| Resource competition is the base problem.
| markdown wrote:
| Simply replace these taxes with a single Land Value Tax. You
| can't game that one.
| ceejayoz wrote:
| Sure you can; people game land/house value assessments all
| the time.
|
| I live in an area with high property taxes, and there's an
| entire little industry of firms who will fight your
| assessment battles.
| tome wrote:
| There are clever ways of addressing gaming, for example,
| to counter undervaluation there could be a rule that says
| that if you value your land at $X then anyone is legally
| allowed to force you to sell it to them for $X.
|
| This works both ways. If the government _over_ values
| your land at $X then you can force them to purchase it
| from you for that much, for example.
| lelanthran wrote:
| > There are clever ways of addressing gaming, for
| example, to counter undervaluation there could be a rule
| that says that if you value your land at $X then anyone
| is legally allowed to force you to sell it to them for
| $X.
|
| That doesn't work. Just because I inherited my fathers
| beloved VW Beetle[1] that's only worth $1000 doesn't mean
| that I want to part with my father's beloved VW Beetle;
| it means much more to me than the official valuation.
|
| Same goes for any other property - boats, land, etc.
|
| [1] Example only, I did not
| tome wrote:
| I don't understand the objection. If it's only worth
| $1000 absent sentimental value then no one will offer to
| buy it from your for anything more than $1000, therefore
| you would only pay property taxes on $1000 of value.
| lelanthran wrote:
| > I don't understand the objection. If it's only worth
| $1000 absent sentimental value then no one will offer to
| buy it from your for anything more than $1000.
|
| No, but you could be forced to sell at exactly $1000.
|
| And, of course, some people are just mean.
|
| A person who wanted to punish their ex could, by force,
| buy a beloved item for more than what it is valued for,
| simply as retaliation against their ex.
|
| Your wedding gifts are typically as close to worthless as
| possible as far as money goes, and yet someone with a
| grudge against you could simply take it off you for a
| small cost to themselves.
|
| So, no, confiscating things from people with "fair
| reparations" to give them to other people is simply a no-
| go.
|
| If you cannot understand the objection at this point,
| then you never will.
| tome wrote:
| > No, but you could be forced to sell at exactly $1000.
|
| No you couldn't. You can't be forced to sell _at all_
| unless you are unwilling to pay land value tax on the
| offered value.
|
| Anyway, I'm proposing a simple game theoretic construct
| that can address the problem of under- and overvaluation
| of property with regard to property taxes. I am not a
| president about to sign a bill into legislation. I
| acknowledge that this idea requires refinement before it
| would work in practice. I just thought people would find
| it interesting.
| lelanthran wrote:
| > No you couldn't. You can't be forced to sell at all
| unless you are unwilling to pay land value tax on the
| offered value.
|
| So, under your proposal, you would have to value your
| property at the sentimental value it has for you, which
| for some things is infinite.
|
| My theoretical dad's VW would have to be "valued" at
| $1500, and if I think someone with a grudge against me is
| willing to pay that, I'd have to progressively increase
| the tax I pay on it just to keep it?
|
| This is a very bad idea; in fact, I cannot think of a
| single state that ever experimented with such an idea. If
| no state, even failed states, thinks it's a good idea I
| don't see what refinement you could make that turns it
| from a bad idea into a good idea.
| tome wrote:
| This is a game theoretical idea that shows how to address
| under- and overvaluation of property. How to refine it
| into a practical system is an open question but I'm
| sorry, I just don't see how your example of inheritance
| of a Beetle scuppers the whole thing.
|
| Property taxation being used to unfairly seize objects of
| mere sentimental value seems an easy to problem resolve
| compared to the problem of imposing property taxation _at
| all_. The _real_ reason land value tax hasn 't seen much
| use in any jurisdiction is that it massively advantages
| the common person above the wealthy landowner, so there
| are huge structural pressures against it.
| Cederfjard wrote:
| So rich people could just take whatever land they wanted,
| or am I misunderstanding you? If Big Ag wants my family
| farm, there's nothing I can do but shut up and accept the
| money?
| tome wrote:
| If Big Ag offers to buy your family farm for $10M then
| you have two options:
|
| 1. Sell it to them for $10M
|
| 2. Pay land value tax on it as though it were worth $10M
|
| What other meaning does "land value" have than what
| someone is willing to pay for it?
|
| (Roughly. There has to be some hysteresis and other
| frictional factors inserted to make it workable. My
| comment was not supposed to be interpreted as a finished
| piece of legislation, just a rough idea of how to prevent
| gaming.)
| jessaustin wrote:
| After they do this a few years in a row, the family will
| be bankrupt from paying property tax and the "Big" firm
| will be able to buy the farm for _less_ than it was
| originally worth.
| eutropia wrote:
| the normal solution is that owner/operators or
| owner/residents don't pay the LVT until time of sale, and
| could instead pay modest interest on the LVT.
| tome wrote:
| That seems a very precise conclusion to draw from a very
| imprecise proposal!
| cgriswald wrote:
| In your scenario, Big Ag just needs to offer an amount
| that causes the tax burden to be unbearable for the
| person who currently owns the farm. That's not "the value
| of the land" but the cash flow of the owner at a moment
| in time.
| tome wrote:
| I presume it would be easy to set up systems of mortgages
| to pay land value tax. In fact I imagine that in practice
| land value taxation would be indistinguishable from
| paying a slightly higher mortgage, for most people. In
| fact given the downward pressure it would impose on
| property prices it could easily mean people end up paying
| _less_ than what they would pay as mortgage under the
| current system.
| nybble41 wrote:
| Say the tax is 10%. You already have a mortgage on the
| property, and not a lot of other assets. "Big Ag" offers
| 20 times what the property is worth to buy you out and
| eliminate a competitor. The tax (10% of 20x) would be
| double the standard market value. No bank is going to let
| you borrow double the ordinary market value in addition
| to what you already owe to cover the tax. You have no
| choice but to sell.
| tome wrote:
| There are many implausible aspects to this scenario.
|
| Firstly, the tax will be nowhere near 10% p.a.. The order
| of magnitude yield on _real estate_ is 5%. Unimproved
| land will be less, of course. 1% seems to be a more
| likely order of magnitude for LVT rate.
|
| Secondly, would "Big Ag" really offer 20x the intrinsic
| value of the property? Seems unlikely.
|
| Thirdly, who wouldn't be dancing for joy to receive 19x
| the value of their property in cash (after paying off a
| possibly hefty mortgage)?
|
| Finally, if you are sitting on land that has economic
| value but you are refusing to unlock that economic value
| then yes, LVT is a pressure to sell. That's (part of) the
| point of LVT.
| nybble41 wrote:
| > Firstly, the tax will be nowhere near 10% p.a..
|
| The rate was, of course, fictitious. Feel free to use a
| different estimate.
|
| > Unimproved land will be less, of course.
|
| Unimproved land would be _more_ since a higher tax rate
| is needed to bring in the same tax revenues if you
| exclude the value of the improvements.
|
| > Secondly, would "Big Ag" really offer 20x the intrinsic
| value of the property?
|
| To eliminate a competitor? I don't find that implausible
| at all. They wouldn't pay that much for an arbitrary plot
| of land, but it's not the _land_ that they 're paying for
| here.
|
| > Thirdly, who wouldn't be dancing for joy to receive 19x
| the value of their property in cash...?
|
| Presumably the owner who didn't want to sell the land at
| the ordinary market value in the first place. Maybe it's
| been in their family for generations, or they just really
| despise Big Ag and don't want them to get it. Maybe cash
| just isn't all that valuable to them.
|
| > ...then yes, LVT is a pressure to sell. That's (part
| of) the point of LVT.
|
| And that is part of what is wrong with LVT. Property
| owners have the right to keep their property no matter
| who wants it or how much they are willing to offer.
| Regardless of the reason.
| throwaway0a5e wrote:
| That works fine (and by "fine" I mean it can be
| implemented, not that it will produce the desired result)
| if you're managing authoritarian society where everyone
| is under the government's thumb but anywhere with a shred
| of democracy will vote out politicians who violate their
| property rights like that.
| tome wrote:
| I can understand how land value taxation could be
| interpreted as violating property rights but I can't see
| how the method I outlined for establishing property
| values is any greater a violation of property rights.
|
| In both cases if you keep your property if and only if
| you pay your land value tax! Of course, this method needs
| some work to be palatable, but that's negligible compare
| to making land value tax itself palatable.
| eutropia wrote:
| Some people don't view anyone as having a "right" to
| something they had no hand in creating.
|
| Earth existed, then humans existed: why does any one
| human have a claim to this finite resource of planetary
| surface area?
|
| LVT says no human has intrinsic ownership of land, that
| it is "held in common", and so no one ought to be able to
| monopolize the gains of its unimproved benefit. Make as
| much money as you want by your productive use of the
| land, or pay the market value if you don't: but don't
| horde it to yourself without paying your share.
| zip1234 wrote:
| LVT would make it much more difficult. LVT does not value
| based on the improved properties on a site--in the purest
| form, it is a tax based on the land alone. A vacant lot
| would have the same tax as a lot with a tall building.
| ceejayoz wrote:
| So, if my area gentrifies, I get forced out by developers
| who want to build a skyscraper on my lot that's now
| theoretically worth tens or hundreds of millions (https:/
| /en.wikipedia.org/wiki/Billionaires%27_Row_(Manhattan...)
| in NYC?
|
| No, thanks.
| nybble41 wrote:
| Worse, if you build an improvement which makes the
| location more valuable (for example, a tech company
| building their headquarters and creating demand for
| nearby residential space) then you pay LVT on the value
| _you_ created. LVT proponents like to pretend that they
| only want to tax the "intrinsic value" of the land, as
| if the entire concept of intrinsic value were not
| thoroughly discredited long ago, but in practice only the
| physical structure would be exempt from the tax as an
| "improvement"--anything else would be too subjective.
| Perhaps if LVT were only assessed on the value of similar
| _unoccupied_ land far away from all improvements it might
| be more reasonable... but that would not fulfill the LVT
| supporters ' objectives.
| neolog wrote:
| So no taxes if you don't own land?
| blackboxlogic wrote:
| I think the idea is that everyone has to live somewhere
| and the increased cost to land owners would trickle down
| as increased costs to land users.
| neolog wrote:
| I'm guessing this idea comes from a time when people's
| main asset was land.
| bzbarsky wrote:
| The US used to have a lot more "luxury taxes" on things like
| yachts. They got repealed "because they were hurting jobs in
| the industry" (e.g. the yacht industry). Leading Democrats at
| the time led the repeal push...
|
| What would be ideal, in some ways, is a progressive consumption
| tax, with the hard parts being defining consumption (e.g. is
| cancer research consumption?) and actually measuring it....
| [deleted]
| bronzeage wrote:
| It all comes down to the fact that the rich don't sell their
| assets - and that comes down to the fact that stocks keep getting
| rescued again and again by the Fed. If the rich keep getting
| bailed out every single time and don't feel they have an
| incentive to sell (because stocks only go up), you'll never get
| to tax the rich on their assets. That's why the ultra rich keep
| pushing to postpone the natural economic cycles - because they
| don't want to sell.
| eperez123 wrote:
| The best part of this: "Musk responded to an initial query with a
| lone punctuation mark: "?""
| larrydag wrote:
| So let me understand that ProPublica is calling a "true tax rate"
| as the rate they paid income taxes divided by the value of
| wealth?
|
| For instance I'm having a hard time reconciling this paragraph.
|
| "In that year, Bezos, who filed his taxes jointly with his then-
| wife, MacKenzie Scott, reported a paltry (for him) $46 million in
| income, ..."
|
| That year reported $46MM in taxes yet the article keeps claiming
| the Bezos earned billions a year. I believe the article is
| conflating reported taxable income and wealth. The US tax system
| is based on taxable income and wealth is a totally different
| asset.
|
| I suppose the article writer is proving the difference in rate of
| taxable income vs wealth but that same comparison needs to be
| done in all other income brackets as well. Perhaps I'm missing it
| but I'm not seeing the "true tax rate" across different household
| income profiles.
| [deleted]
| kristjansson wrote:
| Besides wealth growth being something totally other than income,
| the very wealthiest people have very concentrated holdings. They
| want/need the associated voting power and believe in their
| business. So the position that accounts for basically all their
| wealth growth is the one they sell as little as possible.
|
| Even besides that effect, that the dominant mechanism TFA found
| was 'they don't sell' shows capital gains tax working as
| intended. Growth is reinvested to compound, which benefits
| everyone invested in those companies.
|
| If the state wants to capture more wealth creation should
| participate in more of the risk - say by automatically buying 1%
| (or whatever) of every IPO conditional on the rest fully
| subscribing, and committing to a long (say 10+ year) lock up.
|
| Not that there aren't bugs to fix (step up basis), or
| opportunities for fraud (insufficient audit resources) , or loop
| holes. I'm sure they'll find and publish plenty that won't amount
| to much. But rich guys' side bets netting -zero while they sell
| ~none of their primary holding isn't shocking
| _nicelaris_ wrote:
| This article is written by a complete economic illiterate.
| Imagine thinking that it's a good idea to start taxing people's
| existing stock holdings prior to selling. These people think that
| Jeff Besos being worth 99 billion somehow means that he actually
| has 99 billion in gold coins in a swimming pool in his mansion.
| It's utter nonsense.
| [deleted]
| bkirkby wrote:
| why do these "how much they really pay" exposes always stop short
| of the full comprehension of taxes paid by these business owners?
|
| they conflate "wealth as resource allocation" (business
| ownership) with "wealth as consumption" (personal individual
| gain) to show that these people aren't paying their "fair share."
|
| in this case, propublica has the chart showing the "true tax
| rate" by conflating the two different kinds of wealth.
|
| shouldn't the "true tax rate" account the payroll taxes and
| business taxes paid by these businesses? if we are going to
| allocate the ownership of business as part of the wealth
| calculation, then shouldn't we also allocate the taxes paid by
| these businesses to the individuals as well?
| socialist_coder wrote:
| I don't get the stuff about borrowing. I think I'm missing
| something.
|
| It seems too easy: you borrow money against your assets and then
| use the borrowed money to finance your life, and then pay down
| the loan with pre-tax money? Is it really that simple to avoid
| paying taxes? How do they pay down the loan with pre-tax money?
| metabagel wrote:
| This is why the top income tax bracket should be taxed at the
| rate of 70% or thereabouts. Also, increasing the corporate tax
| rate would capture some of the gains which currently go to
| increases in stock valuation.
|
| Basically, bring back the pre-1980s tax regime.
| dredmorbius wrote:
| You cannot rely on strictly taxing _income_ if capital gains
| and asset inflation are free rides.
| boringg wrote:
| Anyone else notice the hit list of wealthy individuals is all
| democrat supporting (maybe except Elon). These feels like a
| political hit job wrapped in a moral righteousness trying to
| shake the foundations of America. I really can't believe
| ProPublica published this - the security aspect is deeply
| concerning.
|
| FWIW I don't believe the tax system is working properly etc but
| theres some real fallout from IRS leaks/state level security
| breaches at this level. How can you possibly feel safe supplying
| the IRS with your personal information if it was all leaked to
| the internet. Very unsettling.
| jl2718 wrote:
| > anybody notice ... ?
|
| YYYYYeeeeeepppppp.....
|
| That feeling of uncomfortable self-awareness that came over you
| after writing that first sentence... keep going.
| rowland66 wrote:
| How about adjusting the tax rate that is paid on income based on
| wealth? This would absolutely complicate the tax code for wealthy
| individuals, but it would certainly increase the tax paid by the
| wealthy on the income that they do have.
| Cantinflas wrote:
| "We compared how much in taxes the 25 richest Americans paid each
| year to how much Forbes estimated their wealth grew in that same
| time period."
|
| That's not how income tax is calculated, the whole article
| doesn't make any sense at all
| blunte wrote:
| It's just one way to attempt to compare since wealthy people
| typically don't have "income" like normal workers do.
|
| It is an imperfect approach, but it does at least give some way
| of comparing.
| lazyjones wrote:
| It would be a valid comparison if it was compared to the
| average person's wealth increase (e.g. the value of their
| house, 401k) vs. their income taxes.
| [deleted]
| jon-wood wrote:
| It is.
| AnimalMuppet wrote:
| Interesting point. Yeah, my house went up last year, and so
| did my 401k, and I didn't pay any tax on either one. So do
| people have a problem with that? If not, then it's kind of
| hypocrisy to have a problem with it when it happens to a
| billionaire, but not have a problem with it when it happens
| to you and me...
| andrepd wrote:
| > That's not how income tax is calculated,
|
| Yes, and that's the problem (one of the problems).
| rexreed wrote:
| I also don't understand how wealth and income can be conflated
| like this. We have an income tax, so, no duh, we tax income, not
| wealth. Criticizing the income tax because it doesn't tax wealth
| is like criticizing sales tax because it doesn't tax property
| values. They aren't the same.
|
| I don't get how ProPublica can take such a stance. Either it's
| intentional, which is bad, or it's unintentional, which is even
| worse?
| quickthrower2 wrote:
| TLDR: They avoid it by not realising capital gains and gaining so
| much wealth through capital gains rather than income.
|
| Also, if you are rich you will have less need to sell assets and
| can hold on to them in perpetuity.
|
| IMO: Perhaps a fairer tax system would tax these gains and in
| turn reduce income tax. That would put more tax on "lazily
| earned" money.
| axelroze wrote:
| Taxing unrealized gains makes no sense because that money is
| not earned at all until a sell is made. It's all paper. Worth
| something in theory but the moment taxes hike on it the value
| will be lost as no one will invest in that due to tax burden.
| The most notable bug of economics is that by changing the rules
| you also change the incentives and in the end the desired gains
| are nowhere to be seen as no-one holds the assets which are
| taxable pre-sell.
| maxerickson wrote:
| GAAP has companies recognizing unrealized gains, it's not
| complete nonsense.
|
| https://smallbusiness.chron.com/gaap-accounting-rules-
| unreal...
| quickthrower2 wrote:
| "No one would invest" is too strong IMO. People will surely
| invest rather than hold currency.
|
| The other thing is small time investors and pensions could be
| spared this tax.
| anonymoushn wrote:
| If I am a market maker or arbitrageur and I do tens of
| thousands of trades a day, I owe income tax (uh, short term
| capital gains tax) on all of that. If I own equity in a
| market maker or arbitrageur that does tens of thousands of
| trades a day, I owe nothing until I sell some equity.
|
| Over reasonably long time scales with reasonable assumptions
| about the profitability of such businesses, the vast majority
| of the value of the company comes from its preferential tax
| treatment.
| quickthrower2 wrote:
| Not sure why you are downvoted but the point is correct.
|
| Maybe the trading example isn't great. I think a better
| example is simply Amazon - famously not making a profit for
| years.
|
| What they are doing is reinvesting and avoiding tax on the
| "profit" but it's hard to distinguish reinvestment from
| cost and so hard to tax.
|
| Interestingly in my country there is an R&D tax credit for
| businesses and they are happy now to say that software devs
| are doing R&D (so like... an investment) to claim that ha
| ha.
|
| The other angle is using profits to do buy backs instead of
| paying dividends. In both cases you give back to share
| holders. With buy backs you both defer and minimise tax for
| the investors.
|
| Edit: hello downvoter!
| sokoloff wrote:
| Taxing realized gains has the obvious advantage that's there's
| no question as to what the value was at the transaction.
| Unrealized gains have to be estimated/appraised; you get into
| minority ownership issues as well. (How much would you
| personally pay for 10% of a business where I control the other
| 90%? If most of my wealth is tied up in a business I've
| created, given that, how do I reasonably raise the cash to pay
| the tax on a gain that hasn't been realized?)
|
| Similar questions for a house that I've paid off prior to
| retiring. It doesn't make sense to me to have people paying
| imputed capital gains on some number that Zillow or a
| government version thereof decides is right.
| refurb wrote:
| "Hold them in perpetuity"? How is that a benefit? If you don't
| actually have access to the money?
| smeej wrote:
| You don't access the money directly. You access loans against
| the value of it, which, when well-collateralized, have very
| low interest rates that are more than made up for by the rise
| in value of the underlying asset.
|
| You don't have to sell shares when you can take a loan out
| against them instead.
| refurb wrote:
| But you have to pay the loan back.
|
| That's no different than a homeowner taking out a HELOC and
| never selling their house.
|
| Taking a loan is not a benefit.
| spand wrote:
| Houses usually taxed on an ongoing basis. Not really
| comparable to stocks.
| sevzero wrote:
| Just take a loan against the assets to pay for stuff.
| refurb wrote:
| Like a payday loan against my paycheck? Or a HELOC against
| my house?
|
| Would you argue that someone is "gaming the system" by not
| paying taxes on say a rental property but borrowing against
| it?
| quickthrower2 wrote:
| $4bn in earnings and $400bn in wealth, it's more a case of
| what is this benefit you need with billions in cash?
|
| Is there an apartment in New York whose rent you can't
| afford?
|
| What is for sale as a private person that's worth cashing in
| the billions and paying tax to buy? You already have a
| business you can use to turn that into more money anyway
| which is probably the most satisfying game.
| spand wrote:
| Unrealised gains compound faster than taxed gains. You then
| only have to pay taxes on the money you spend.
| beervirus wrote:
| So if Bezos has a few billion in unrealized gain one year, we
| send him a big bill. The next year the stock market crashes--do
| we send him a big check?
| quickthrower2 wrote:
| We send him a credit on his next years tax
| instance wrote:
| This would increase the cost of capital and potentially reduce
| investments, would it not?
| andrepd wrote:
| Yes, because capital ownership is private. Perhaps we should
| rethink that?
| fastball wrote:
| Why?
| chii wrote:
| > Perhaps we should rethink that?
|
| hasn't it already been tried, and shown to fail?
| andrepd wrote:
| There's a universe of possibilities between unrestrained
| globalised hyper-financialised capitalism, and murdering
| people who wear glasses and making everybody work on
| agriculture a la Cambodia.
|
| Ideas like Georgism allow us to retain the most useful
| features of a market economy while taming its brutal,
| violent, undemocratic features. That's the premise of
| market socialism in general.
| nevinera wrote:
| There's an angle I'm not really seeing talked about - any wealth
| vehicle that allows the wealthy to _defer_ their tax burden to a
| substantially later point in time creates _massive_ incentive for
| those individuals to push for reduced taxation on that vehicle in
| the long-haul. It 's one thing to want reduced taxes because
| it'll save you 8% on your %6M income each year, but another to
| want reduced taxes because it'll save you 8% on _30 years of
| deferred taxes_.
| jfasi wrote:
| > America's billionaires avail themselves of tax-avoidance
| strategies beyond the reach of ordinary people. Their wealth
| derives from the skyrocketing value of their assets, like stock
| and property. Those gains are not defined by U.S. laws as taxable
| income unless and until the billionaires sell.
|
| So if we're going to tax them in years when their wealth
| increases, I presume we're also going to issue tax refunds when
| their wealth decreases?
| hasbot wrote:
| Very interesting article. Reading through the comments here, it's
| clear a follow up article is needed to explain why Propublica's
| analysis is legit and accurate.
| bestcoder69 wrote:
| Bezos claiming the child tax credit is gold. Bernie got finger-
| wagged in the primaries for wanting universal benefits, because
| others said the rich shouldn't be able to take advantage of them
| too. Well, guess what, CTC is a means-tested program - millions
| of families have to go through BS paperwork to prove they're
| deserving of it - and the richest man on earth is somehow able to
| claim it too! Hilarious.
| beckman466 wrote:
| > "The release of a private citizen's tax returns should raise
| real privacy concerns regardless of political affiliation or
| views on tax policy. In the United States no private citizen
| should fear the illegal release of their taxes."
|
| the capitalist system is a real hoot.
| disabled wrote:
| The Financial Times just put out an article on the front page on
| FT.com stating that the USA is going to investigate the leak of
| the records. Michael Bloomberg is angry, and he says that he is
| going to use "every resource possible" (loosely quoted) to figure
| out who leaked this information.
| dgan wrote:
| This article does _not_ conflates income and wealth, stop saying
| that. This is NOT what it says. Thats ' the whole damn point,
| they say that the system "tax the income" is flawed because it
| allows to borrow as much as your wealth allows, and live your
| life exactly as if you had that in income, without ever paying
| the income tax.
|
| I am quoting "Their wealth derives from the skyrocketing value of
| their assets, like stock and property. Those gains are not
| defined by U.S. laws as taxable income unless and until the
| billionaires sell"
| deburo wrote:
| What about all the common folks that do the same? You don't
| have to be a millionnaire to benefit from this "trick". It's
| merely proper planning.
| pessimizer wrote:
| I assume you mean "common" as "not royal," not "common" as
| "not wealthy enough to live off their investments."
| dgan wrote:
| Is this even serious? "what-about" them? It seems pretty
| obvious that they don't have as much wealth, so the issue is
| less relevant. Again, that's the point of the article..
| Common folks didn't see their wealth skyrocketing
| mardifoufs wrote:
| It depends on what your definition of common folks is. Even
| here in Montreal, where housing prices have been
| historically depressed VS the US and the rest of Canada, I
| know plenty of families with very modest salaries who
| bought 200-300k $ homes 10-20 years ago that are now worth
| well north of 1.5m+. Obviously a lot of people didn't get
| richer, but a huge proportion of the population did (at
| least on paper).
|
| By any definition being worth more than 1m$ is a lot of
| money, especially here. But it seems like the goalposts
| keep getting moved to the point where saying "what about
| the millionaires" is seen as an attack on the working class
| because billionaires exist. I've seen people argue that
| Bernie wasn't rich because he is just worth less than
| 2m$(!!). Sure, billionaires have a lot more wealth than
| your average millionaire but I'd bet even taxing them at
| 100% would bring so much less revenue than raising the tax
| rates on the "lower millionaire bourgeoisie" by a few
| percentage points. Yes we can do both, but it's not going
| to happen considering the complete focus on the mega
| wealthy sometimes coming from other rich people in denial.
| tootie wrote:
| You can get similar returns buying index funds and you
| don't need a down payment or good credit. The sunk cost
| or rent is usually higher than the sunk cost of mortgage
| interest and home maintenance, but gives the added
| benefit of increased liquidity and ability to diversify.
| And personal mobility.
| Kalium wrote:
| > This article does not conflates income and wealth, stop
| saying that.
|
| The article repeatedly uses what it calls a "true tax rate",
| which is calculated from wealth. It does this knowing that
| people reason about tax rates as percentages of income.
|
| With this in mind, I think it's fair to say that the article
| puts a fair amount of work into talking about wealth and income
| as different, but also willingly conflates the two in order to
| produce shocking numbers when it's convenient.
| rocho wrote:
| Read the article again. The "true tax rate" is calculated on
| the _increase in wealth_, which is a very reasonable
| alternative to income.
| Kalium wrote:
| Excellent advice! I read and understood the article as
| using this the first time. I feel my criticism stands,
| though again I understand that others may feel differently.
| specialist wrote:
| How could popular media do a better job at this?
|
| Use more graphs?
|
| Call out incomes (wages, dividends, rent, etc) and assets
| (property, investment) differently?
| Kalium wrote:
| I think that would be a great approach. Incomes and asset
| values are very different and work differently. They
| benefit from being discussed with different vocabulary in
| order to make this distinction clear to the general public.
| jameshart wrote:
| They explicitly calculate it based on _increase in wealth_ ,
| rather than total wealth, which seems like a reasonable
| substitution.
|
| If you look at Scrooge McDuck's giant pit full of gold coins,
| and even though the pipe flowing into the room marked
| 'income' doesn't have any coins rolling down it into the
| pile, but the pipe heading out marked 'expenses' seems to be
| steadily draining coins... and yet the pile of coins is
| somehow still getting bigger...
|
| .... maybe you have to accept that just looking at what's
| going on in that income pipe isn't giving you the whole
| picture.
| Kalium wrote:
| You're completely right on both counts. That's precisely
| what they do. Income is definitely not the whole picture.
|
| I don't disagree with anything you've written here. I just
| think that conflating growth in value of assets and liquid
| cash is misleading, and using a snappy sloganeered idiom to
| do so compounds the error. That this is done in pursuit of
| illustrating an absolutely critical and nuanced political
| point about finances makes it, in my opinion, all the more
| important to be clear.
|
| I recognize that this is a position with which reasonable
| people might differ.
| throwawayffffas wrote:
| > "tax the income" is flawed because it allows to borrow as
| much as your wealth allows, and live your life exactly as if
| you had that in income, without ever paying the income tax.
|
| I don't see how that can be true, you eventually have to repay
| the loan, to do that you need income which will be taxed. For
| example if you borrow 100000 dollars for one year with 3%
| interest you will have to pay to the bank 103000 dollars, as
| far as I understand you can only write off the 3000 dollars on
| your taxes. The reason rich people borrow against their equity
| is because they don't want to sell it and their equity makes
| them more money than the interest rate on their loans.
|
| Furthermore while the article does distinguish wealth from
| income, it fails to distinguish realized from unrealized gains.
| Taxing unrealized gains comes with two very significant
| downsides.
|
| Firstly to make the system fair it should provide tax credits
| for unrealized losses which means when the market goes down all
| of these people will use that tax credit to cancel out the huge
| salaries they will be paying themselves on that year.
|
| Secondly while a tax on unrealized gains will be annoying to
| rich people it will be devastating to small time investors,
| because it will force them to liquidate their minor positions
| in order to pay their taxes.
|
| To give a concrete example lets assume a college grad has a
| single share of amazon he bought last year for around 2000 usd,
| today that same share is worth around 3000 usd that's 1000
| dollars of gains if our hypothetical student has to pay income
| tax on that 1000 dollars let's say 20% because he also has
| income. He will have to pay with his income (which has already
| been taxed) or he will have to sell that stock essentially
| robbing him of the future gains he could have if he held that
| stock.
| dillondoyle wrote:
| I don't think anyone is arguing to tax any unrealized gains
| except the exceptionally wealthy? Like can you argue that
| someone worth over 100mm would be hurt by say 1% annually?
|
| I can see an argument for executive controlled corps, like
| Zuckerberg wants to maintain control of a company. But it
| seems like there are many ways Zuck for instance could avoid
| losing his voting power or restructure some even odder
| special share class so it doesn't matter.
|
| If he doesn't want to pay cash maybe even allow treasury to
| hold this 1% as stock and pass the voting power back to the
| owner.
|
| Opens a HUGE can of worms in many ways (hold, sell,
| incentives to increase value can be bad for the rest of us).
|
| But I like the fundamental concept of adding back benefit for
| OUR gov for all we do to help.
|
| if the rest of us taxpayers are giving huge support to the
| market and corporations like QE, stimi, loose regulation/tax
| law, trade wars, whatever, we should also get some of the
| gains to fund services or lower taxes on the other 50 or even
| 99%.
| freddie_mercury wrote:
| You don't have to repay anything. You die and your estate
| pays off the balance.
|
| The basis is stepped up at death and the estate can then sell
| with zero tax to settle the debt.
| vnkatesh wrote:
| > The basis is stepped up at death
|
| Isn't that a major tax loophole? What is the rationale
| behind it in the first place?
| bpodgursky wrote:
| The basis is stepped up because of the 40% estate tax.
| Basically no countries have both a not-stepped-up basis and
| an estate tax.
| andrewflnr wrote:
| > your estate pays off the balance.
|
| This is what I guessed, but maddeningly the article doesn't
| actually say it out loud, instead talking about estate
| taxes and trusts (which surely also play a role). Do you
| know another source for this?
| imhoguy wrote:
| > I don't see how that can be true, you eventually have to
| repay the loan, to do that you need income which will be
| taxed.
|
| You refinance constantly.
| koheripbal wrote:
| Bankers aren't stupid. At some point, they'll stop lending
| you money and will just seize your collateral.
| imhoguy wrote:
| You are right, they aren't. You need to grow wealth and
| hang out with bankers at company expense ;) No more
| growth and no more yaht trips then it is time for
| dividends or shares sell off to pay loans.
| toast0 wrote:
| Only if the value of the assets goes down signficantly.
| Your loan based on Enron stock needs to be paid back (or
| recollaterialized), but one based on a stock that's been
| doing well or on a reasonably diversified portfolio can
| probably avoid repayment until you sell or die. From what
| I've seen, asset backed loans will have a % limit of
| value for initiating a loan and a higher % limit to keep
| the loan, but both limits are often much lower than a
| brokerage margin loan.
| jdmichal wrote:
| Of course they aren't, which is why they're perfectly
| happy to continue refinancing. They make money on the
| interest, not the principle. And each refinance
| _increases_ the bank 's total collected interest. As long
| as they eventually get the principle back, a bank is
| perfectly happy with this arrangement.
| drdec wrote:
| You have $100M of stock in Berkshire Hathaway. You use
| use that as collateral to borrow $11M. You use $1M of the
| loan to pay expenses (including the interest on the
| loan). You invest the other $10M in Amazon.
|
| A year later you have $11M in Amazon stock and $110M in
| Berkshire Hathaway. You borrow against the Amazon stock
| and use that to pay off the first loan. Lather, rinse,
| repeat.
|
| The bankers are always happy. Why would they ever
| foreclose on you?
| dnissley wrote:
| Because stocks don't always go up
| 34679 wrote:
| When they go down to any significant degree, Congress
| steps in and socializes the losses.
| koheripbal wrote:
| Individual stocks never go down?
|
| Is this a serious comment?
| fireflash38 wrote:
| As a hypothetical:
|
| Why do you think people are willing to put money into
| accounts that they pay no taxes on now, but will have to pay
| taxes on later?
|
| There's multiple reasons, and they all tend to apply to
| equity too. As a bonus, equity in things like property has
| even more bonuses for taking loan cash now and repayment
| later: things depreciate in value (theoretically), and you
| get write offs. There's _all_ sorts of tax shenanigans you
| can do to shift around what money you owe when to minimize
| your tax burdens. Getting 'paid' with a loan is one of them.
|
| Another major thing is: they can borrow so much that it
| doesn't matter. If you could borrow a billion dollars based
| on your house, would you do it? Do you think you could turn
| that money into something more? What if you never turned a
| profit off that billion, and instead just lived off of it.
| Then died. Never paid any taxes, because you 'lost' money
| every year. Combine that with all the BS you can do with
| estate taxes, and you can probably send a huge chunk of
| change to your kids too.
| weird-eye-issue wrote:
| You're mistaken - not all types of loans require you to pay
| towards the principle. Google pledged asset line
| kristjansson wrote:
| They sell your assets if you don't pay the principal
| though, which would trigger capital gains.
| weird-eye-issue wrote:
| Only borrow half of what they allow you to. Don't borrow
| the full amount. In that case it would require more than
| a 50% drop before you run into issues.
| throwawayffffas wrote:
| I googled a bit, it looks to me that pledged asset lines,
| typically require you to pay off the capital.
|
| There are loans marketed as interest only, but my
| understanding is that even with these loans the payment of
| the capital is deferred to the end of the term, not that
| you don't have to pay it back at all.
|
| There are annuities, a financial instrument where the
| seller receives a lump sum and then pays back a fixed
| amount in perpetuity but I think only insurance companies
| sell these.
|
| I think the most likely scheme is what the other comment is
| suggesting, refinancing the loan repeatedly
| triceratops wrote:
| > not that you don't have to pay it back at all.
|
| That's exactly how they work. As long as you keep making
| interest payments, and the value of the asset you took
| the loan against remains above a pre-defined threshold,
| you never need pay back the principal. The idea being
| that you invest the money you borrowed and earn a profit
| on the difference between the interest payment and your
| investment return. And the interest payment itself is
| tax-deductible because you borrowed to invest. Neat
| trick, right?
|
| Btw, this is a power also available to ordinary people,
| in the form of a HELOC.
| epigen wrote:
| Is that _true_ though? "Ordinary people" also have to
| pay additional fees (ex. Mortgage insurance), have higher
| interest rates, and have access to fewer high-interest
| investment opportunities.
|
| I mean, I'm glad I didn't HELOC my way to a few Bitcoin
| last month, so maybe it's best we leave these tricks to
| the rich folk anyway.
| weird-eye-issue wrote:
| No, there is no "end of term". You just have to pay the
| interest every month. They can ask for the principal back
| at any moment though but by the nature of the loans if
| that happened you'd sell your stocks to make good on it.
| But in practice that would only happen if there is a
| sharp decline in the underlying assets so if you only
| borrow like 30% of the value then you are generally fine.
| Obviously there is risk involved since this involves the
| stock market and borrowing money.
| paul_f wrote:
| I think most people forget about this. You can have capital
| gains, not pay taxes, and borrow against them, and spend the
| money.
|
| In my opinion, do away with income and capital gains tax and
| have a pure consumption tax instead. Want a lavish lifestyle?
| Then you will pay higher taxes.
| koheripbal wrote:
| And? What's wrong with that? There's no free lunch there -
| they still have to pay back the loan. It's not like it's free
| money.
| paul_f wrote:
| You don't necessarily have to pay back the loan until your
| death, then it is taken from the estate and the balance
| passed on to heirs. At that point the step up basis occurs
| and the process starts over again. No taxes were paid on
| the value of the loan. (Correct me if wrong on this)
| kristjansson wrote:
| That's one of those things that seems too dumb to
| possibly be true, but it looks like it is? An estate can
| sell stocks in probate with cost basis set to date of
| death, not purchase? Sort of makes sense, the heirs would
| get the stepped-up basis, the stocks, and the debt if the
| executor didn't net them out in probate.
|
| I guess it's a bet you'll be dead before the interest
| outweighs the potential tax, or volatility spikes?
| Betting on your own death seems to macabre, and too
| tempting too the fates.
| Chamix wrote:
| You pay off the interest with the 40k of equities you can
| liquidate in 0% capital gains bracket, per year.
|
| And yes, a bet that interest rates will remain below
| effective tax beyond that.
| papercrane wrote:
| For ultra-high net worth individuals it's a pretty safe
| strategy. Typically a low volatility equity that doesn't
| pay dividends is used and only a small percentage of
| their portfolio is used.
|
| Over the long run it tends to work in their favour as
| well, since it's very likely that the increase in the
| portfolio value will outpace the interest paid.
| kristjansson wrote:
| > increase in the portfolio value will outpace the
| interest paid
|
| Ah, right. Caught me twice on my fixed-pie thinking :)
| throwaway210222 wrote:
| No tax perhaps, but interest has to be paid.
|
| Of course, in a ZIRP fantasyland the interest is
| negligible.
| e12e wrote:
| If the choice is 40% tax or 2% interest...
| kristjansson wrote:
| I mean, long term rate is 20%, so taking a margin loan at
| 2% to finance consumption is a bet that you have less
| than 10 years to go...
| papercrane wrote:
| That's assuming the asset that would've been sold doesn't
| increase in value. It's likely that the asset will
| increase in value more than the cost of the loan.
| koheripbal wrote:
| You are conflating assets and liabilities. Are you really
| suggesting people pay taxes on their liabilities?
|
| That would be insane.
| dillondoyle wrote:
| Hurts the 99% far more. 5% when you can barely afford food
| makes a difference, not so much on your newest mega yacht.
| tootie wrote:
| Loans still have to be paid back with cash plus interest. It
| can give wealthy people some leverage to make their tax
| payments more efficient in that they can spread their
| payments over time or wait for a down year, to liquidate a
| chunk of assets to pay down debt so they never have a bulge
| in realized income. But there is still a cost in terms of
| debt service that make this have limited value. It's not like
| loans are free money.
| alok-g wrote:
| >> In my opinion, do away with income and capital gains tax
| and have a pure consumption tax instead. Want a lavish
| lifestyle? Then you will pay higher taxes.
|
| I hold a similar view. Why should someone pay more taxes just
| because they earn more.
|
| Taxes should include a 'constant' term for benefit that
| everyone in the society is reaping (e.g., security, public
| infrastructure and facilities, etc.). There can also be terms
| proportional to the spendings/lifestyle (i.e., sales tax) and
| even income, when again the government is introducing some
| benefit per sale or money earned.
|
| The prime purpose for governments, and thereby enforced taxes
| should be to pay for things needed that no one individually
| will otherwise pay for but which the society as a whole
| needs. An an example, pollution hurts everyone, yet, no
| particular entity would spend on curbing pollution unless
| done by enforcing at a social level.
|
| Note: If there is no tax whatsoever in earnings, there would
| also be a need for some additional tax like inheritance tax,
| which I support, so that people do not just keep on hoarding
| the earnings without ever spending.
| someguydave wrote:
| It's much more popular to sell taxes-as-punishment than to
| propose rational tax policy.
| globular-toast wrote:
| I've asked this before but never got a proper answer. What
| difference would it make if the rich paid more tax?
|
| If the top 10% of richest people had to pay twice as much tax,
| they'd still be the top 10% richest people, they'd just have
| fewer zeros in their bank accounts. But there would still be the
| same number of yachts and Rolls Royces to go around, so the price
| of those would just come down. But still only the top 10% could
| afford them.
|
| Similarly, if the bottom 10% of people now have more zeros
| because they pay less tax, there would still be the same amount
| of food and low-end luxury goods to go around, so the price of
| those would go up.
| dredmorbius wrote:
| Add the time element.
|
| Think of a bunch of bowls, with a flow coming in the top, and a
| drain or spillway.
|
| The rates of filling and draining matter. Most especially if
| the rate of draining _is dependent on the quantity of water in
| the bowl._
|
| If drain rate _increases_ with volume, the size of bowls tends
| to remain reasonably equal with time.
|
| If the drain rate _decreases_ with volume, large bowls get ever
| larger.
|
| The present tax scheme in the US (and in many other locations)
| is the second model. Large bowls get larger.
| globular-toast wrote:
| I didn't ask for an "ELI5" style explanation, but thanks
| anyway.
|
| I still don't see why it matters. So the rich get richer. But
| it's just more zeros. What practical difference does it make?
| dredmorbius wrote:
| At a given point with enough draining, the rich stop
| getting richer.
|
| You've made a mistaken assumption.
| boringg wrote:
| How the f did they get the documents? That seems to be part of
| the story that is missing. Seems pretty sketch to me to get tax
| documents for all of these people.
| pembrook wrote:
| Extremely disappointed to see Propublica (typically a place of
| important journalism) resort to clickbait headlines and
| disingenuous charts like this.
|
| Here's the TL;DR of main reason why Bezos, Musk, etc don't pay
| taxes:
|
| Unrealized capital gains.
|
| This is not some evil nefarious "tax avoidance" scheme. When you
| create a business, and the entire world starts wanting to buy
| your products, and the business becomes extremely valuable
| (sometimes temporarily since the market is arguably in bubble
| territory)...AND you don't sell any of that ownership stake, no,
| you obviously don't have to pay taxes on that theoretical
| increase in wealth.
|
| You haven't sold, thus the gains aren't even real. Tesla stock
| could drop by 90% next week and so would Musk's wealth.
|
| The fact that propublica is including unrealized gains in these
| charts completely undermines the reputation they once had for me.
| [deleted]
| jon-wood wrote:
| As they point out in the article though, its possible for them
| to take out _very_ substantial loans using that stock as
| collateral, effectively giving them a way of realising those
| gains without having to actually sell the stock and pay capital
| gains tax on it. They even get to offset the interest on those
| loans for what income tax they do pay.
| pembrook wrote:
| Then the author should have written an article focusing on
| the stupidity of allowing loan interest deductions, not
| charts of unrealized capital gains trying to conflate it with
| income.
|
| Doesn't matter if you take out loans against those gains,
| they will be taxed eventually when sold.
| rvense wrote:
| But these people aren't even paying income tax on their normal
| salaries.
| [deleted]
| tomp wrote:
| TL;DR: unrealised capital gains aren't income, so they're not
| subject to income tax.
|
| Also this article is 100% stupid. There's a lot of proposals
| about _wealth_ taxes, which have their problems, but apparently
| the author of this article expects capital owners to be taxed in
| _income_ as a share of the _growth_ of the value of their
| assets... should they get money back when /if the markets crash?
| This is a completely unrealistic proposal.
| thaumasiotes wrote:
| > the author of this article expects capital owners to be taxed
| in income as a share of the growth of the value of their
| assets... should they get money back when/if the markets crash?
|
| Sure, and people paying inheritance taxes should get their
| money back when they produce new heirs.
| itake wrote:
| They need to get rid of the step up basis.
| blablabla123 wrote:
| The issue is quite complicated. I think a common denominator is
| to have a single tax that gets taxed once, which is pretty much
| how it works in Germany but I guess similarly in most OECD
| countries. (At the same time there are calls for a tax per
| transaction like the Tobin tax.) But what happens is that
| "traditionally" business owners buy things effectively tax-free
| (or at 50% less taxes) through their companies that they use at
| home. I think this is now even widened towards self-employed or
| even just more or less regular remote employees who work for a
| company in a different country. Practically all companies that
| I recently talked to that do remote in a different country
| would require me to found a separate company.
|
| As mentioned elsewhere, if you are in a higher income segment
| (to be realistic even a medium one suffices) you have access to
| a proportionally much wider range of tax discounts.
|
| > should they get money back when/if the markets crash? This is
| a completely unrealistic proposal.
|
| Still it hits a nerve. If you happen to be one of the upper
| 0.1% you are likely to have (not very profitable) assets like
| real estate that survive practically any market crash. For most
| people it makes no sense at all to invest in such assets unless
| you want to go ultra low risk and accept even loosing money
| over time while prevent a total loss - even without the tax. In
| fact in London many completely overpriced real estate objects
| are known to not be inhabited and bought by very wealthy people
| that just want to secure their money. Unfortunately this
| practice drives prices up even more and damages the market.
| [deleted]
| rybosworld wrote:
| Wealth hoarding is a source of lost productivity. I don't care
| how you slice it.
|
| And this is not inherently a bad thing. People are entitled to
| save.
|
| That is until the amount that's being hoarded is
| disproportionately large.
|
| It's difficult to come up with an agreeably fair solution. But
| with decades of inaction, the problem is only growing. It's to
| the point where an objectively bad solution might be better than
| the continued inaction.
| jl2718 wrote:
| Hmm.. I wonder why we have problems. Well, maybe it's because
| we're taking half the money and giving it to the billionaire
| class. And no, your new tax idea won't work.
|
| If you plan to take anything from anybody, you're going to have
| to use force or threats of violence. This only works against the
| powerless, not the powerful. That's tautological. I don't care
| what your 'solution' is.
|
| However, there are plenty of organizations that easily raise
| money without coercion. They are called businesses. They do this
| by selling stock and borrowing cash. The government also does
| this. They print dollars and sell bonds. No difference![1]
|
| This is not theoretical anymore. T-bill issuance has been sailing
| along at nearly $2T per month for the last year.[2] That's 100%
| of tax revenue in two months. And yet, CPI is hardly affected.
| No, it can't go on forever, spending must be controlled, but tax
| revenue is actually irrelevant. Inflation occurs when supply
| exceeds demand. Demand for dollars comes from economic growth and
| investment. Eliminate the tax burden and dollar demand will soar.
| The only difference is that we will no longer be subsidizing the
| untaxed foreign and domestic users of the dollar economy.
|
| So just stop collecting it. It's obsolete. Stop forcing
| productive people to fund the ultra-rich, and let the wealth
| naturally accumulate to those doing the work. No 'trickle-down'
| economic theory needed if you don't force everybody to carry it
| to the top in the first place.
|
| [1] for a tighter analogy, consider Eth as legal tender for smart
| contracts
|
| [2] https://www.sifma.org/resources/research/us-treasury-
| securit...
| kaminar wrote:
| The article is such click bait and so disingenuous...disgusting
| how they infer something is amiss, and that we should be alarmed.
| The info could easily have been presented in a much more
| authentic and positive light. The author is obviously an ahole.
| throw737858 wrote:
| Most people can do this sort of tricks. Come and live offshore,
| some countries in EU have real taxation 5%-20% on income between
| 50k-1M/year. Absolutely legal, with all obligatory contributions
| like social and health insurance.
|
| There is no crime, goverment is not bullying you, and rent is 600
| euro/month. You can really have a family on single income, if you
| want to...
| anonymoushn wrote:
| US people have to get a second citizenship and renounce their
| US citizenship before they can achieve the tax rates you
| mention.
| throw737858 wrote:
| Not true, there is an exception for income under 80k/year.
| Over that person can operate via LLC with dividends etc. Most
| people renounce because it is difficult and frustrating to
| deal with US tax system.
| aww_dang wrote:
| Self employment and social security will still take 15%
| swift532 wrote:
| Can you name a few such countries. I live in the EU, but when
| you have a business in my country you are always breaking some
| rules no matter what, and a lot is up to the discretion of the
| tax people.
| throw737858 wrote:
| For self employed devs Slovenia has 80% expense flat rate, so
| final tax is like 10% under 100k with zero administration.
| Bulgaria has LLCs with 10% income tax. If you have to buy
| property to get residency, there is Greece, Cyprus,
| Portugal...
| lazyjones wrote:
| Romania. 10% income tax, 5% dividend tax, 1% corporate taxes
| for startups up to 1m revenue.
|
| Cost of living: very low, 30-50% less than Austria/Germany.
| ChuckNorris89 wrote:
| That's interesting. Do you have nay more details or link to
| resources on Romania?
| lazyjones wrote:
| https://expatcenter.ro/tax-guide/
| st1ck wrote:
| There are some comparisons, like https://thebanks.eu/compare-
| countries-by-tax-rates
|
| But a lot of details are missing in them. Countries like
| Romania, Ukraine and Georgia have single-digit % tax for sole
| proprietors, but IIUC it applies on revenue, not income.
|
| Estonia has 0% corporate tax, but 20% on dividends, which
| should go well with technique discussed in the OP.
|
| Or for the higher income brackets, Italy has EUR100k/year
| flat tax: https://www.economist.com/europe/2020/10/29/a-flat-
| tax-schem...
| tazjin wrote:
| Russia. 13% tax rate with no social contributions if you're
| on a "highly-qualified specialist" visa.
| hurril wrote:
| Stakes in business like these can never be realised to nominal
| value so their present value is much lower than their nominal.
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