[HN Gopher] Who died and left the US $7B?
___________________________________________________________________
Who died and left the US $7B?
Author : jsnell
Score : 409 points
Date : 2024-10-08 18:58 UTC (1 days ago)
(HTM) web link (sherwood.news)
(TXT) w3m dump (sherwood.news)
| toomuchtodo wrote:
| https://www.texasmonthly.com/article/houston-fayez-serofim-d...
| cfraenkel wrote:
| Interesting enough read, but the post title is misleading. It was
| hardly a gift, it was an estate tax payment.
|
| Not _everyone_ is a greedy narcissist only out for themselves!
| Danieru wrote:
| Left does not mean gift, it's a common term which applies when
| politely referring to the a recipient of an inheritance.
| bombcar wrote:
| Left means a gift via inheritance, which is the exact
| opposite of an estate tax (it's not a gift or via
| inheritance, it's a tax on the value of an estate and paid
| before distribution).
| s1artibartfast wrote:
| They could have squandered the money or given it away.
|
| They could could have blown it on building a pyramid to
| house their corpse.
|
| The government is not entitled to the assets.
| chgs wrote:
| They aren't entitled to their assets. They only have
| worth because of civilisation. How well do you think bill
| gates would survive in a mad max utopia that Randians
| fantasize about?
| bombcar wrote:
| I was severely disappointed when I realized that, I thought
| some billionaire had gone nuts with
| https://www.treasurydirect.gov/government/public-debt-report...
| dylan604 wrote:
| and in the 3 seconds it took to read you comment, the
| interest on the debt increased more than this "gift"
| wahern wrote:
| It takes about 30 seconds for the US National Debt clock
| (https://www.usdebtclock.org/) to tick off $1 million, so
| almost 2.5 days to tick off $7 billion. I'd say $7 billion
| covers much more than 3 seconds of interest.
| dylan604 wrote:
| even in your "correct" math, your comment doesn't really
| improve the ridiculously small amount of moving of a
| needle that this would make
| sushid wrote:
| "Even if I was wrong by many orders of magnitude, I'm
| still correct!"
| wahern wrote:
| I mean... so I just noticed the "US Total Interest Paid"
| clock. That takes about 45 seconds to tick over $1
| million, so $7 billion covers ~1% of the interest
| payments in a year.
|
| That seems like a sizable contribution for a _single_
| person in a country of 330 million.
| dylan604 wrote:
| Great, so now all we need is another 99 people with
| similar donations and we could cover the interest for a
| year. Then you need to continue to do that every year
| forever because you have yet to make any movement on the
| principle
| chgs wrote:
| This wasn't a donation. This was a fee for providing a
| society that allows him to accumulate so much.
| zztop44 wrote:
| Why do you care? The country has never paid back this
| debt, will never pay back this debt and no-one expects it
| to.
| dylan604 wrote:
| That's my point. It is ridiculous to think that $7b is
| anything but a drop in the bucket. While $7b is a big
| number to mere mortals, it is chump change in terms of
| national debt.
| zztop44 wrote:
| Oh okay, that makes sense, and I agree with you. That
| said, paying tax is still important for a number of
| reasons; and ultimately the national budget is a large
| bucket made up of small drops.
| cycomanic wrote:
| What is your point exactly? That's sort of saying the
| weight of the heaviest man ever alive (>300 kg) is a drop
| in the bucket if we compare to the total weight of people
| in the US, which is true but also completely irrelevant
| (in fact that comparison actually makes it even clearer
| how out of proportion the $7B are for a single person).
| dylan604 wrote:
| This person is being called out as unique because they
| "allowed" this money to be collected rather than doing
| the normal thing people with this type of money do and
| find ways to avoid the tax.
|
| So if you're so gung-ho positive we can make a dent in
| the debt, then why not make sensible comments about
| making changes so the tax is not so easily avoidable
| instead of nonsensical fat people comments
| recursive wrote:
| It does improve it, by several orders of magnitude. If
| your point is strong enough to make without exaggerating,
| then use of hyperbole can only stand to distract from the
| point.
| elzbardico wrote:
| Given the fact, as stated in the article that there are a
| myriad of legal ways by which millionaires and billionaires can
| skip paying the estate tax, it could very well have been the
| result of an intentional decision not to evade this by some
| socially-conscious dying billionaire citizen.
| rzzzt wrote:
| There is also a fair bit left after taxes: "Based on
| estimates of the average tax rate on estates, the February
| 2023 payment implied the death of someone possessing a
| fortune between $17.5 and $40 billion."
| tonetegeatinst wrote:
| I'm sure their is a hidden joke about interest payments for the
| federal debt. Wonder what the gov will do with the cash they
| found in the couch.
| Kapura wrote:
| Pretty obscene that somebody could have so much wealth that
| $7,000,000,000 is just the tax bill. Also weird that it's framed
| as a "gift."
| sushid wrote:
| The article highlights that it's not actually that hard for the
| ultra-wealthy to avoid a massive estate tax bill through proper
| tax planning and investment strategies. What's striking here is
| that this individual wasn't even the richest person to ever
| die, yet he paid the largest estate tax in history, likely by
| choice.
| bluGill wrote:
| > likely by choice.
|
| There is an element of competitiveness there. Some rich want
| to be known as rich and so they can brag about paying the
| most taxes that in turns implies they have the most money.
| Others want to be quieter about their wealth and so don't
| want you to know they have it and wouldn't tell you how much
| taxes they pay.
| rootusrootus wrote:
| If he were doing it competitively, I don't understand the
| strategy. His name was leaked, not announced, and since he
| is dead he cannot feel like he won the competition.
| jrockway wrote:
| Anyone can make a voluntary contribution to the United States
| Treasury: https://fiscal.treasury.gov/public/gifts-to-
| government.html
| mynameishere wrote:
| I always wondered if there was a way to effectively "burn"
| one's entire wealth, creating a small deflationary event that
| would increase the value of existing dollars. How could one
| do this? Donate to the Federal Reserve? Or would you
| literally have to cash everything out and burn it?
| hollerith wrote:
| According to my understanding, burning US dollar bills,
| donating to the Fed (if such a thing is possible) and
| donating to the Treasury are approximately equivalent in
| their effects.
|
| What puts a lid on how much money the Fed creates is the
| desire to keep inflation to reasonable levels, preferably
| 2% per year. Your burning your cash allows the Fed to
| create more while adhering to their inflation target.
| Someone please correct me if I am wrong, but my
| understanding is that although the Fed decides how much
| money is created, the Fed is not allowed to keep or to
| spend newly-created money, but rather must give it to the
| Treasury (perhaps through some complicated or non-obvious
| mechanism) which makes it available for the government to
| spend.
| MobiusHorizons wrote:
| At least one way they do this is to buy treasury bonds.
| It is not clear to me what happens to the interest though
| .
| willcipriano wrote:
| A big part of modern monetary theory is taxing the newly
| printed money and putting it towards (wasteful) government
| programs to "burn it" in a sense.
|
| Predictably, politicians who support MMT only did the
| printing part and skipped that bit once inflation started.
| bialpio wrote:
| That does not feel like burning the money, more like
| propping up the private sector (naively, government's
| deficit is going to be private sector's surplus if you
| don't actually reduce the amount of money in
| circulation).
| VirusNewbie wrote:
| How does that burn the money? If the government is
| _spending_ the money, it 's going to federal employees
| and purchasing good and services from the general
| economy.
| kelseyfrog wrote:
| It helps to conceptualize the circuit of money as it
| flows from government(G) to the private sector(P) back to
| the government as G-P-G. The outlays(G-P) and
| receipts(P-G) can both be increased or decreased to
| affect aggregate demand. MMT's view is that inflation can
| be a result of aggregate demand outstripping economic
| capacity, though not the only one. Supply-side
| constraints, resource shortages, or structural
| bottlenecks can also lead to inflation.
|
| MMT emphasizes that taxation (P-G) is not necessary to
| "fund" government spending. Instead, taxation primarily
| serves to control inflation and create a demand for the
| currency. Taxation creates a value for the currency since
| taxes are payable only in the government's currency.
|
| When we hold the P-G-P view of government spending, we
| assume it operates like a household - that a government
| has to collect taxes before spending and this is viewed
| by MMTheorists as an antiquated perspective. The
| misconceptions of "The government as a household" were
| based on the gold standard or fixed exchange rate
| systems, which since 1971 no longer apply.
| hgomersall wrote:
| Please everyone read this comment. Any disagreements
| should come with relevant references showing how it's
| wrong.
|
| An additional point to add is the mechanism by which
| taxation controls inflation. Tax serves to suppress
| demand in the private sector, freeing up resources that
| can then be bought at non-inflated prices. This is why
| super wealthy people are irrelevant to a sovereign
| government's ability to spend; their marginal propensity
| to consume is too low to be seriously impacted by normal
| levels of taxation. It's also why tax has to be broad
| base to be useful.
| willcipriano wrote:
| That's where the wasteful bit comes in.
|
| If the taxed dollars ended up with say hurricane victims
| or other struggling Americans, those dollars would chase
| goods and services domestically driving up the price of
| those goods.
|
| Now consider if instead you helped fund Israels
| socialized medicine program or paid off some of Ukraines
| debt or paid interest to Chinese creditors. Those dollars
| wouldn't have much effect when it comes to increasing the
| price of eggs in the US as they are being spent far away
| in another economy.
|
| A similar effect could occur if the money ended with the
| wealthy folks, say wealthy owners of private defence
| contracting firms, as those dollars might chase building
| a super yacht (inadvertently employing some people but
| also consuming foreign made materials and labor) instead
| of trying to rent an apartment in Iowa. Less dollars
| chasing Iowa apartments, considering supply and demand,
| lower prices, lower CPI.
|
| Take dollars from the middle class who will drive up the
| cost of the American dream and instead give them to
| people who will drive up the price of luxury goods.
|
| It's never explained this clearly beacuse people would
| riot, but with this framework the choices of government
| in the last few decades or so suddenly makes more sense.
|
| (I don't endorse MMT)
| hgomersall wrote:
| I'm yet to meet anyone that actually understands MMT and
| doesn't endorse it. You might be the first, but I doubt
| it. Which bit of MMT do you have trouble with?
| sdenton4 wrote:
| In fact, dragons are important stabilizing influences in
| dungeon economics. The hoard of gold isn't inflationary
| until the adventurers liberate it and start buying wands
| and stuff.
| patwolf wrote:
| Reminds me of something I read years ago about how Ultima
| Online would create "gold sinks", super expensive items
| that served no purpose other than help remove gold from
| the economy and prevent inflation.
| koolala wrote:
| I guess the trick there is they don't spend it. The money
| leaves the virtual economy. IRL that's impossible.
| endgame wrote:
| This is a problem with all kinds of virtual world
| economies. Players accumulate so much gold that some
| substitute becomes more useful. Diablo II had the Stone
| of Jordan, for example.
| ckemere wrote:
| https://en.m.wikipedia.org/wiki/The_KLF
| ChadNauseam wrote:
| Couldn't you just not spend or invest the money? I think
| putting it in a chest and burying it in an unmarked
| location would be equivalent to burning it.
| somethoughts wrote:
| It'd be really interesting if you could allocate your
| donation to specific branches of the government (i.e. NSF,
| Pre-K, etc.).
| somethoughts wrote:
| Interestingly a lot of the larger philanthropic organizations
| are just as administration heavy as the US government and
| suffer from the same mission creep and the same obfuscated,
| bureaucratic decision making process, etc. Not to mention the
| leadership is often richly compensated (i.e. $1M in salary) and
| non-elected.
|
| In fact we should probably celebrate gifts to the US government
| more than we do.
| jimcsharp wrote:
| My hunch is that taxes are the most efficient 'charity', even
| with the bloat, and everyone's too busy sniffing farts in
| their corner to see it.
| mozman wrote:
| No thanks, I'd rather keep more of my paycheck.
| schneems wrote:
| The ultra rich don't get paychecks. If you're thinking in
| terms of "paychecks" you're not who they are talking
| about when they say "tax the rich."
| bialpio wrote:
| 100% this. This reminds me of what my SO says: if you
| have to work, you are not in the upper class. I don't
| think I agree with this statement fully (I personally
| think that top decile by income is already upper class),
| but I feel like I'm becoming more open to re-evaluating
| my opinion...
| bluGill wrote:
| Most upper class work. They work different jobs, but they
| are generally not sitting around retired. They might or
| might not get a paycheck, but they are working. (if you
| own a restaurant you will probably pay yourself minimum
| wage when you do work - dishwashers start at double that
| - talk to your accountant but this is often the best
| legal way to handle your hours that are trackable) Steve
| Job's was famous for taking a salary of $1/year - he
| clearly was working and upper class.
| triceratops wrote:
| But they don't have to work.
| bluGill wrote:
| Most middle class don't have to work either - they are
| just not willing to accept the lifestyle that forces.
| Even poor people could find enough savings by 30 to not
| work if they really want to live that lifestyle. (I don't
| blame anyone for not wanting to live like that)
| triceratops wrote:
| > they are just not willing to accept the lifestyle that
| forces
|
| Jeez the pedantry around here.
|
| Let me spell it out: Upper class people don't have to
| work to maintain _their existing lifestyle_. Steve Jobs
| could have continued wearing black turtlenecks and paying
| fines for parking his Mercedes in handicapped spots for
| the rest of his life, without doing a lick of work. That
| he didn 't is a credit to his work ethic and passion for
| the work.
| bialpio wrote:
| Out of curiosity, how much money do you think is needed
| to survive ~55 years ("savings by 30" + life expectancy
| around 85ish = 55yrs) without working? Also, please spell
| out biggest assumptions you're making.
| bluGill wrote:
| Eat rice and beans $50/month. Live in a $200 tent with a
| warm sleeping bag replace every 10 years. every year you
| get $100 for clothing at goodwill (walmart for underware)
| No other possessions. don't get sick as you don't have
| health care, but you should on average live to 70 or so
| [5-10 years less than average with health care], assuming
| you are not unlucky. so about $70/ month.
|
| I wouldn't want to live like that and I wouldn't wish it
| on even the most undeserable (life without parole
| prisoneers). you could do it. Some do it for a month or
| two in college as they see the world - but they go back
| to a more normal life and just fondly tell stories.
| enos_feedler wrote:
| Not only that but it's also the structure that enabled the
| riches in the first place. I don't see why more people
| don't do this.
| advael wrote:
| Mostly because of a very successful propaganda campaign
| by people who sought to loot the post-war economic boom
|
| Generally speaking, the sad truth of a complex economy is
| that coordination is hard, and there's usually a short-
| term privatized gain to be had by someone willing to
| poison the future and the commons. No amount of benefit
| to humanity overall or even the specific society such a
| person lives in will convince a person who simply doesn't
| care about anyone else. Fortunately for humanity, a very
| small minority of people actually operate like that.
| Unfortunately for humanity, some of them have managed to
| accumulate a lot of power
| enos_feedler wrote:
| Well said! I feel better already
| bluGill wrote:
| Taxes are not and never will be because no two people have
| the same priorities. Even if my favorite charity is only
| 10% as efficient as the government in doing what I want, a
| donation to that charity does what the charity does. A
| donation to the government goes to military, welfare
| (social security, medicare...), roads, scientific research,
| and a long long list. If I want to put extra money into say
| Lymphoma research $10,000 to a really bad lymphoma charity
| will get $3000 to research (finding a lymphoma research
| charity that bad is left as an exercise for the reader -
| the ones I'm aware of are considerably better). The same
| $10000 to the government will add nothing to lymphoma
| research since the share of the budget going to that is a
| rounding error.
| wizzwizz4 wrote:
| But if you and a million other people, all with differing
| priorities, all agree to pay taxes...
| bluGill wrote:
| Most of the right wing who is against taxes still agree
| to pay taxes on something. They disagree what taxes
| should go for and how much, but they generally agree some
| are needed.
|
| Society is about the compromise. However that compromise
| makes nobody happy.
| schneems wrote:
| > we should probably celebrate gifts to the US government
| more than we do.
|
| I had the idea that we should put a donation box on tax
| forms. The 100 top donators get on the "US 100" list (like
| Forbes) but it's based ONLY on how much you donate, not how
| much you claim to be worth.
|
| It's one thing to claim to be rich to a Forbes reporter, it's
| another to have the (tax) receipts to back it up.
| internetter wrote:
| This is sorta genius. I could totally see Musk and Bezos
| engulfed in an ever escalating leaderboard feud:
|
| https://www.forbes.com/sites/kenrickcai/2021/09/28/elon-
| musk...
| dh2022 wrote:
| Billionaires flaunt their wealth via yachts, mansions,
| space rockets and super-PACs. Which to me seems way more
| fun than getting your name on a tax list...
| safety1st wrote:
| I think it's a great idea. It would generate good press
| for the donors and some billionaires care a lot about
| that. Guys like Buffett would do it. It's basically free
| money for the government.
| HeyLaughingBoy wrote:
| That's not flaunting it; that's just buying things you
| like because you have the money. Flaunting would
| definitely be getting your name on a list that you don't
| need to be on.
| freejazz wrote:
| Gigantic luxury yachts of ever-increasing lengths are
| absolutely flaunting.
|
| > Flaunting would definitely be getting your name on a
| list that you don't need to be on.
|
| Oh, like a list of the largest yachts and their owners?
| vanjajaja1 wrote:
| reminds me of the way dubai auctions off the 3 digit car
| license plates, then hotels do things like only letting low
| number license plates park out front
| t0mas88 wrote:
| Brilliant move, then use the money to support those that
| are less well off. You can have the ultra-rich bragging
| about how much they paid, while those that need it most
| are benefitting. A real win-win.
| AmericanChopper wrote:
| Most tremendously wealthy people don't want to be known for
| being tremendously wealthy. Unless being known for being
| tremendously wealthy is a part of your wealth accumulating
| strategy, the attention it brings is almost entirely
| negative. Being tremendously wealthy without millions of
| people constantly chirping about clawing as much of it away
| from you as possible, or demanding an explanation from you
| every time you wipe your ass is a far better outcome, and
| most people who are savvy enough to become billionaires are
| savvy enough to figure that out pretty quickly.
| M95D wrote:
| Only the ones at the top of the list would be interested in
| donating and keep donating. If a rich person calculates
| that he could only reach the 57th place by donating a large
| part of his money, then he would have no incentive to
| donate. 57th place means nothing.
| schneems wrote:
| The key though is that you don't know how much everyone
| else puts in. There's a psychological effect of seeing
| the amount and saying "That's it? I can do better than
| that." It's basically a silent auction.
|
| > 57th place means nothing.
|
| It means you're on the board and got one higher than 56th
| place. I'm a top 50 rails contributor, that means
| something to me and to others.
|
| It's kinda like F1. Some teams are racing for the
| constructors championship. Some teams are racing for the
| midfield. All of them are racing for even a single point
| and to stay in the game.
| rootusrootus wrote:
| > I had the idea that we should put a donation box on tax
| forms.
|
| I don't believe it's on a tax form, but you can absolutely
| just donate money to the US. They make it very easy, just
| go to pay.gov.
|
| https://fiscal.treasury.gov/public/gifts-to-government.html
|
| I like your idea of adding a leaderboard.
| bko wrote:
| Why is that obscene? Presumably the person created something
| very valuable to the world. Sure there are zero-sum ways to
| generate wealth (e.g. suing people, theft, front running
| trades) but generally that kind of wealth comes from actually
| generating something that people value.
| vkou wrote:
| > Presumably the person created something very valuable to
| the world
|
| Or they are a rent-seeker, or a straight-up thief that sucked
| a lot of value out of the world. (Or one of their ancestors
| did, etc, etc.)
|
| Or they robbed Peter to create value for Paul, and took a
| share of the difference.
|
| These are all tried and true mechanisms for wealth
| generation. Without any information, you shouldn't assume
| that their contributions were net-positive.
| HeyLaughingBoy wrote:
| Barring evidence to the contrary, some of us prefer to
| assume that people have good intentions.
| FabHK wrote:
| The word "Presumably" is doing a lot of heavy lifting there.
| That Econ101 justification is harder and harder to keep up as
| you learn more about both economics and the real world.
|
| For detailed counter arguments, see Branko Milanovic _Global
| inequality: A New Approach for the Age of Globalization_ ,
| James Kwak _Economism: Bad Economics and the Rise of
| Inequality_ , Walt Bogdanich & Michael Forsythe _When
| McKinsey Comes to Town: The Hidden Influence of the World 's
| Most Powerful Consulting Firm_, and many other books.
| pembrook wrote:
| If you need to pull out a library of texts and appeals to
| authority to rebuke OP...yet aren't able to actually
| communicate a rebuttal yourself...I would argue your
| position is more of a religious one than one based on an
| understanding of the "real" world.
| kombookcha wrote:
| Damn, that guy is citing sources, must mean he's wrong
| and there is no need for you to examine any of the vibes-
| based assumptions you are making about the real world
| then.
| pembrook wrote:
| The point is, there's no way to evaluate if this
| commenter is wrong, since nobody is going to read 7 books
| to verify the validity of an internet comment.
|
| It's a classic logical fallacy; appeal to authority.
| There is no reason to believe any of these writers have a
| better understanding of how the world works than any
| other "authority" of the past like Karl Marx.
|
| Just because someone says something in a book doesn't
| make it true.
| HeyLaughingBoy wrote:
| He's not "citing sources." He's outsourcing his argument
| to textbooks. The point stands: if you want to refute an
| argument, do so yourself, possibly with reference to
| corroborating sources. Don't just say "you're wrong. Go
| read this stuff to figure out why" -- that's no way to
| have a discussion.
| ChadNauseam wrote:
| The GP never said they were wrong because they gave
| sources, they said they didn't give any rebuttal at all
| and instead only cited sources that presumably contained
| a rebuttal. If they said "such and such author did a
| survey that found that only 5% of money held by rich
| people got to them via productive pursuits", that would
| be one thing, but they just said "such and such author
| says you're wrong"
| cipheredStones wrote:
| The article says that he made it by stock trading. It is, at
| best, difficult to articulate how that could be creating
| value rather than capturing it. Many of the world's
| billionaires made their money that way.
|
| Doing something positive-sum is _a_ way to become a
| billionaire, but many people are very handsomely paid to
| ensure that their clients are on the good side of zero-sum
| transactions.
| CityOfThrowaway wrote:
| He did it through offering a _money management_ service to
| large institutions and wealthy individuals.
|
| That money management service includes, amongst other
| things, picking stocks. But that's the tactical "what". The
| value-added element is that he preserved and grew that
| wealth instead. It turns out that is hard to do, and is
| indeed a positive sum service to customers. They get to
| relax _and_ make money. Great outcome.
| cipheredStones wrote:
| Yes, he was capturing value _for his clients_ , and
| getting paid some of that. That isn't the same thing as
| doing something that increases the amount of wealth in
| the economy, which was my point.
| ipaddr wrote:
| The entire point of the stock market is to get capital to
| companies to allow them to do things that may increase
| wealth (could be local, state, country or globally).
| Successfully doing this means the companies he supported
| did well.
| quesera wrote:
| > _The entire point of the stock market is to get capital
| to companies_
|
| Only if the shares are newly-issued, though.
|
| Usually your counterparty is just someone with different
| cash flow needs, or who disagrees with you about the
| future. No benefit accrues to the company.
| whatshisface wrote:
| Taking money away from mismanaged companies, and giving it
| to well-managed ones, is a net positive of stock trading.
| Another net positive of stock trading is making buyers and
| sellers available all day, for anything on the market. Yet
| another benefit of stock trading is to make it more
| difficult to manipulate the market - there's a reason why
| pump and dump scams only occur with assets that see very
| little attention (i.e. are low-volume).
| cipheredStones wrote:
| > Taking money away from mismanaged companies, and giving
| it to well-managed ones, is a net positive of stock
| trading.
|
| Where "well-managed" means "good at delivering money to
| its shareholders", which is at best obliquely related to
| a positive impact on the world. (Also, I'm skeptical that
| the stock price in itself makes that much of a difference
| to what the company is able to do.)
|
| > Another net positive of stock trading is making buyers
| and sellers available all day, for anything on the
| market. Yet another benefit of stock trading is to make
| it more difficult to manipulate the market - there's a
| reason why pump and dump scams only occur with assets
| that see very little attention (i.e. are low-volume).
|
| In other words, the benefit-to-the-world of stock trading
| is that it makes it easier to trade stocks? And both of
| these are the result of unprofitable trading as much as
| profitable trading, so they can't be the proof that the
| money comes from the value delivered!
| glompers wrote:
| Not GP, but if I recall correctly, "taking money away
| from mismanaged companies" only occurs if the companies
| choose to do another issuance of shares in the future to
| raise equity, or stock options in the future to
| compensate people, in which case they would have to issue
| shares at a lower valuation, or issue more stock options
| to provide a similar benefit, than if they were a
| desirable company.
|
| But stock trading also penalizes well-managed companies
| in slow-growing or more mature industries by giving them
| a higher cost-of-capital, just as it would if they were
| poorly managed. It seems a haphazardly blunt instrument
| for allocating liquidity to value generation. It piles on
| where rewards seem ready to be reaped, and makes it
| harder for mature sectors to renew or reinvent
| themselves.
| dclowd9901 wrote:
| Does the quality of management of a company actually
| dictate its positivity to the world at large? Seems like
| a quite unrelated signal.
| whatshisface wrote:
| The world's not all tobacco advertising and chemical
| spill coverups, there are also dishonest mechanics and
| dirty restaurant kitchens.
| FanaHOVA wrote:
| Do you really think a single individual could make $7B of
| profits from stock trading? They'd need to be trading
| $30-100B. Point72 manages $35B and has almost 3,000 people
| on staff.
| Arch485 wrote:
| Sure, but you could also toss that $30bn into SPY and
| make a killing.
| 6stringronin wrote:
| I'm sure the value they created trickles down?
| intended wrote:
| Hasn't it largely been finance and inheritance related, until
| very recently when tech joined the scene ?
|
| Given the way everything is being made into its crappier
| form, it's arguable that even tech isn't "adding value"
| anymore.
| wisty wrote:
| It's not real money. They aren't holding all the gold like a
| dragon. Or maybe they are, but that isn't hurting anyone, it's
| wealth not consumption. They consume the same number of
| calories as a poor person. They breathe the same amount of air.
| Maybe they have a few extra bedrooms, but their consumption
| could easily be less than a millionaire.
| kaibee wrote:
| Idk man, I'm pretty sure I consume a lot fewer labor hours
| than a billionaire with a super-yacht. The thing to focus on
| is how many labor-hours someone is consuming. When a
| billionaire allocates ~20 people of labor-hours every day to
| maintaining that super-yacht, that means there's ~20 people
| fewer labor hours for services for everyone else. And
| building that super-yacht also consumed a lot of high-skill
| labor hours.
| bluGill wrote:
| That means there are 20 MORE labor hours, not less. The
| typical person reading this is only working a couple hours
| to do anything related to the basics (you don't need nearly
| as large a house as you live in - even if you live in a
| tiny house)
| wisty wrote:
| As I said, it's consumption not wealth. A billionaire with
| a super-yacht is more obscene than a trillionaire who
| doesn't have one.
| Dalewyn wrote:
| >Also weird that it's framed as a "gift."
|
| https://www.irs.gov/businesses/small-businesses-self-employe...
|
| https://www.irs.gov/businesses/small-businesses-self-employe...
|
| >The gift tax is a tax on the transfer of property by one
| individual to another while receiving nothing, or less than
| full value, in return. The tax applies whether or not the donor
| intends the transfer to be a gift.
| juunpp wrote:
| Gift tax is a tax on gifts. It's not a tax that happens to be a
| gift.
|
| https://www.irs.gov/businesses/small-businesses-self-employe...
| Apocryphon wrote:
| Satoshi?
| ianwehba wrote:
| > Some tax attorneys I spoke with theorized that the $7 billion
| payment was in fact a gift tax paid as part of an estate-planning
| strategy designed to avoid an even larger payment down the road,
| a strategy they expect to be common ahead of the Trump tax
| expiration.
| yieldcrv wrote:
| I hope this is educational for people, indeed the forbes rich
| list is inaccurate and there is no way to know how much anyone is
| worth, with just 5 minutes of planning it all goes opaque if you
| so desire
|
| Although there is the aspect of the immigrant being grateful for
| American opportunities, its far more likely that Fayez Sarofim
| didn't expect to die and had these naked assets outside of the
| trusts and nonprofits. Since he also had trusts and nonprofits.
| manquer wrote:
| inaccurate or incomplete ?
|
| The latter is to be expected. Forbes only covers certain type
| of wealthy people for logistical if not also political reasons.
|
| It does not cover powerful people who control enormous wealth
| but ownership maybe murky what is personal wealth and what is
| state owned, royal families or dictators like Putin or Kim Jong
| Un or their extended family will never make the list.
|
| Beyond those kind of people, the murky and opaque ways that
| money can hidden also means it is hard to track estates that
| did not come from publicly made fortunes (ex: from listed
| company etc) that can be somewhat easily tracked.
|
| Even when public like Bitcoin and crypto, Nakomoto 's estimated
| ~1.1M bitcoins is worth $70B today, nobody knows who he is.
| There haven't been any transfers from those addresses, however
| that doesn't mean a part of that enormous fortune is outside
| the bitcoin ecosystem as real money, the owner of the wallet
| could be using them as security for large loans like Elon (or
| other rich people typically do ) does with their stock without
| actually selling it to minimize tax.
| yieldcrv wrote:
| ok but yes inaccurate was the accurate word choice
|
| I wasnt talking state actors and unlinked crypto fortunes
|
| Just wealth from opaque sources and opaque vehicles
|
| All limited partners in Venture/Hedge/PE funds are opaque for
| example
| chgs wrote:
| On the other hand perhaps the keys to that 70B have been
| lost, in which case bitcoin has deflated even more than
| expected.
| BobAliceInATree wrote:
| He was 93 when he died. I think he knew his time was coming
| soon.
| bluGill wrote:
| I have no idea what his situation was. Some people do live to
| over 100 so it is entirely possible that he expected another
| 10 years and then died in is sleep (as happened to someone
| else I know who died at 63). If you get a terminal cancer
| diagnosis you might know you have 6 months or a year, but
| many people don't get that much of a clue (I know one person
| who was down to 2 weeks when unexpectedly his body fought off
| the cancer and he lived many years after)
| niobe wrote:
| My takeaway: Forbes rich list amounts are basically fictional. Do
| you think they are devoting the kind of resources it would take
| to unravel each billionaire's finances? Clearly not. If it's
| mostly large sharehioldings they might be in the ballpark in some
| obvious cases.
| seb1204 wrote:
| How about the rich list is just a list of rich people that also
| desire others to know of their riches.
| umeshunni wrote:
| Famously, there was the Saudi billionaire who would pump up
| the price of his stocks in the months prior to when they
| published the rich list.
| fakedang wrote:
| Al Waleed bin Talal. Shrewd businessman, but also one of
| the most fragile egos out there.
| daedrdev wrote:
| Probably more that it's easier to figure out wealth from
| public stocks compared to private businesses and real estate.
| 1oooqooq wrote:
| forbes sell entertainment. their clients are not even who read
| it, but advertisers who but advertisement.
|
| readers and space for ads on the magazine pages are both called
| inventory in the biz.
| JALTU wrote:
| A legit biz, I mean, look at everyone reading and commenting
| here! :)
| Amorymeltzer wrote:
| Matt Levine touched on this briefly today, and I liked his two
| cents:
|
| >It's kind of cool? Like you could imagine a hierarchy, in
| roughly ascending order of wealth:
|
| >Too poor to pay taxes.
|
| >Rich enough to pay taxes.
|
| >Rich enough to not pay taxes.
|
| >Rich enough to not even bother with not paying taxes.
| leprechaun1066 wrote:
| In 2021/2022 there were 60 people in the UK who probably fall
| into that last group. Together their taxes accounted for about
| 1.4% of the UK tax bill despite being something like 0.002% of
| the population.
| vlovich123 wrote:
| What percentage of the wealth did they control?
| schiem wrote:
| By summing up the top 60 entries for UK billionares from
| The Times Rich List for 2024 (which is data from 2023), I
| get almost exactly 500 billion pounds in net worth
| (PS499.55bn). According to Wikipedia, the UK had a total
| net worth of $15,972bn USD, which comes out to PS12,298bn
| at the current exchange rate of 0.77 pounds / dollar.
|
| That comes out to around 4.1% of the total wealth. However,
| the number from Wikipedia is from 2022, so this figure
| isn't going to be entirely accurate.
| arcticbull wrote:
| Are you familiar with the concept of noblesse oblige?
|
| Further does this include _all_ taxes or just income taxes
| which are only a portion of revenues used to make less well
| off people look like moochers.
|
| For instance, in the US, there's social security and Medicare
| taxes -- and payroll tax, the social security and Medicare
| tax contributed on behalf of employees by employers. Renters
| also pay their landlords property taxes. Sales taxes,
| tariffs, etc are all born by end users.
| fallingknife wrote:
| Renters do not pay property tax in the US. That liability
| is entirely on the owner.
| rahimnathwani wrote:
| Your statement is technically correct. It's also
| technically correct to say that diners, not restaurant
| owners, pay sales taxes.
|
| The reality is more nuanced. Introducing a sales tax on
| restaurant meals affects both diners and restaurant
| owners: restaurant owners can't pass on the whole
| increase to diners, and diners cannot afford to go out as
| much.
|
| Similarly, property tax levels influence landlords'
| decisions to enter or exit the rental market, impacting
| housing supply and, consequently, tenant rents. 'Paying'
| a tax has two distinct meanings:
|
| - Who bears the economic burden after the tax is
| introduced
|
| - Who is legally responsible for paying the tax
|
| These two concepts are not always aligned.
| fallingknife wrote:
| This is a silly distinction because by that standard you
| could equally say that my employer pays my rent because
| they are the source of income which I use to pay it.
|
| Property tax in the US is a liability of the owner. This
| is in contrast to other systems like the UK where it is a
| liability of the occupant.
| rahimnathwani wrote:
| The incidence of taxation is a well-studied concept in
| economics, with a solid theoretical foundation and
| empirical evidence backing it.
|
| You dismiss its application as a 'silly distinction' and
| repeat the fallacy that the incidence of taxation falls
| on the party who is legally liable.
|
| If you don't believe me, and don't want to read up on
| 'tax incidence', consider what would happen if sales tax
| were paid by retailers instead of customers. Would the
| flow of money change at all? Would any party be worse off
| or better off?
| lazide wrote:
| This is an entirely ridiculous argument. Who actually
| 'writes the check' is _actually important_ in a
| discussion about _who writes the check_ , despite the
| fungibility of money. Renters don't pay the owners
| property taxes in the US, even if they pay rent. Full
| stop.
|
| Why this matters is because in some cases, owners can end
| up 'under water' with even rent not covering property
| taxes in the US.
|
| In other places, that may not be possible.
| eastbound wrote:
| No, really, it has been studied, taxes affects both
| supply and demand. It's one of the first chapters of any
| microeconomics book.
| lazide wrote:
| you might want to actually read my comment. the details
| matter.
| arcticbull wrote:
| Well, I get charged sales tax when I buy something at a
| store, itemized on my receipt. But the store writes the
| check to the state, and I write the check to the store.
| Did I pay or did the store? And why does it differ from a
| renter? Are we splitting hairs over itemized vs
| unitemized receipts?
|
| And what about a retail store in England where the VAT
| isn't itemized? Did I pay or did the store?
| lazide wrote:
| No landlord in the US itemizes, or even lets you see the
| property tax they are paying anywhere they can control.
| You can dig it up if you know where to look though,
| usually, from public sources. Same with the landlords
| financing costs.
|
| And it varies between much lower than you would expect,
| to much higher - and doesn't generally change the amount
| they can charge in rent between the two scenarios. Though
| of course, landlords will go broke _eventually_ if on
| average rent doesn't exceed property taxes, finance
| costs, and other costs they pay _on average_.
|
| Competitiveness/survival between landlords over time will
| often hinge on their ability to pick the best options and
| structure/time this well to minimize their costs while
| maximizing their returns. A much harder problem than I
| think anyone who isn't in that game realizes.
|
| Which is why successful property management and
| investment strategies vary quite a bit depending on these
| _specific details_ , like who pays what, when, and under
| what circumstances.
|
| So all I'm getting from what you're saying is you don't
| actually understand what you're talking about concretely,
| and you're going off a first year economics textbook
| instead of actual experience.
|
| Am I correct, or not?
| arcticbull wrote:
| Could you answer my question about itemized vs unitemized
| sales taxes in the US vs UK and whether you think it
| relevant?
| lazide wrote:
| Of course it's relevant to the business models, specific
| prices charged, marketing, and general economics.
|
| In a way that means _the details matter_ and you'll get
| different end prices, even for the same nominal tax rate,
| depending on how it is applied.
|
| For instance, when sales taxes are not shown at point of
| choice (on the shelves) they tend to not impact consumer
| behavior (US), where when they are (most of Europe), they
| do.
|
| Which is also why in the US, retailers tend to fight
| efforts to include sales taxes into on-the-shelf prices.
| Because they know it will impact sales.
|
| Just like in jurisdictions where renters pay/see property
| taxes, that impacts their choices, where in places they
| don't, it doesn't. At least in any specific, individual
| way.
| arcticbull wrote:
| My question was about whether an itemized receipt changes
| who pays
| lazide wrote:
| Not having an itemized receipt certainly changes who
| people _think_ is paying, and for what, eh? And making
| decisions when there is no 'itemized receipt' matters
| too, doesn't it?
|
| That is my point.
| zajio1am wrote:
| I appreciate your nuance, as mixing up economic burden
| and legal responsibility for taxes is a common fallacy in
| discussions. But specifically for rents in supply-
| constrained cities, i would guess that supply is highly
| inelastic, therefore market rate of rents is already as
| high as acceptable by renters (i.e. determined by demand
| curve) and therefore property tax would not affect it
| much.
| jjav wrote:
| > Renters do not pay property tax in the US.
|
| There's a simple way to visualize why is not true:
|
| You're renting a property for $1000/mo. Whatever the
| owner is paying for property taxes, you don't know.
|
| Then, property taxes go up by $200/mo. Do you think your
| rent won't go up by at least $200/mo as a direct
| consequence of the tax increase? Because it will. Because
| the renter is of course paying for all costs, including
| those taxes.
| fallingknife wrote:
| No it won't. The rent will not go up until the lease is
| up. And at that point it still won't necessarily go up by
| 200 bucks because that's just not how markets work.
| kaibee wrote:
| > Then, property taxes go up by $200/mo. Do you think
| your rent won't go up by at least $200/mo as a direct
| consequence of the tax increase? Because it will. Because
| the renter is of course paying for all costs, including
| those taxes.
|
| So, before property taxes went up, the landlord could
| have raised rents by $200/month, but hadn't because..?
| freejazz wrote:
| Could he have?
| jjav wrote:
| > So, before property taxes went up, the landlord could
| have raised rents by $200/month, but hadn't because..?
|
| Because you don't pre-date inflation.
|
| It is the same as asking why the supermarket doesn't
| raise the price of milk to what inflation estimates say
| it'll probably be next year.
| bluGill wrote:
| Rent does not go up because your landlord has to compete
| with a landlord one town over where the tax didn't go up
| and so if your rent goes up you will just move.
| NoMoreNicksLeft wrote:
| Your landlord knows moving is a hassle that you'll avoid
| if it means paying a little more. So he raises it just
| enough that you won't just pack up the Uhaul and go live
| there. Then over the next few years, he does the same
| again, when he can, until he recoups the property tax, or
| near enough of it.
|
| Some landlords are bad at guessing the correct numbers.
| Others are savants. In aggregate, renters end up paying
| almost all of it over time if not immediately, and those
| that don't end up suffering in other ways (when the
| landlord just stops paying the tax entirely, but taking
| your rent, the building gets sold, and you don't get to
| renew the lease because they're going to knock it down
| and build luxury condos).
| arcticbull wrote:
| That requires getting a different job, my friend. Vendor
| lock-in with housing is real.
| bluGill wrote:
| In Singapore and a few other places. However in the US
| housing is not a government monopoly (sometimes low
| income housing is). You can always find a landlord in a
| different town. No need for a new job as you still live
| in the same metropolitan area.
| arcticbull wrote:
| Ok but what if the landlord raises rent by $200, while
| commuting would cost me an extra $250. Or what if I move
| from a town with good public transit to one where I have
| to drive by your own admission, several towns over.
|
| What if moving costs $1000, which is another $83 per
| month over a year.
| bluGill wrote:
| Commuting will not cost you an extra $250 in any world I
| know of. You are typically only moving a biking distance
| here.
| bluGill wrote:
| Note that it doesn't need to you personally that moves.
| Even people who would move anyway will force lower rents
| just to attract new renters. It takes longer this way but
| renters typically search a large area when looking for a
| new place and they care about their costs vs ammentities.
| NoMoreNicksLeft wrote:
| Some say that the owners should be permitted to pass that
| tax bill along to the renter in the form of increased
| rent. Can't someone think of the poor starving landlords?
|
| Seriously though. Renters pay the property tax, even if
| they don't get to see the bill.
| rootusrootus wrote:
| The implied assertion with that metric is that every
| individual taxpayer should pay the same amount. That seems
| like a hard sell.
| wiseowise wrote:
| > In 2021/2022 there were 60 people in the UK who probably
| fall into that last group. Together their taxes accounted for
| about 1.4% of the UK tax bill despite being something like
| 0.002% of the population.
|
| How much wealth do they have compared to other population?
| jmpeax wrote:
| What does being rich even mean? For us it might be the total sum
| of shares, realestate, cash, minus debts. If you're hiding your
| wealth then what does it mean to "have" that wealth if no one
| knows it belongs to you? I guess it comes down to the wealth you
| can control in your favour, but then how is that different to
| being in congress?
| dools wrote:
| > but then how is that different to being in congress?
|
| Less work, less risk, the ability to corruptly influence
| multiple people in congress by proxy rather than scrounging
| around for funds from corrupt private individuals out to
| influence policy in their favour.
| ChainOfFools wrote:
| Wealth is a proxy for having options, even if you do not
| exercise them. There are thus many forms of wealth, and some do
| not translate directly across domain boundaries.
|
| Arnold Schwarzenegger famously explained that he remains
| committed to a demanding bodybuilding regimen even long after
| becoming fabulously wealthy precisely because his physique is a
| form of wealth that cannot be bought at any price, and is
| available to almost anyone who wants it badly enough. A
| billionaire facing an acute and aggressive terminal cancer
| diagnosis has all the options anyone could want, but one.
| xpe wrote:
| Yes, there are many forms of power. Different forms are
| sometimes fungible to various degrees (varying across time and
| space). I would expect that financial wealth is the most
| fungible form of any of them under usual circumstances.
| TacticalCoder wrote:
| > What does being rich even mean?
|
| To me it means living in a country where the government's debt
| ain't more than 30% of the country's GDP. So I moved to such a
| country.
| MobiusHorizons wrote:
| Obviously moving countries will change lots of things about
| your life. Do you attribute any of those changes to low
| government debt? I have personally always thought about it as
| more of a long term problem rather than a present day issue.
| Would be curious to hear your reflections.
| chubot wrote:
| I don't really understand the question, because based on the
| details in the article, SOME people knew he was wealthy, but he
| wasn't a public figure
|
| Most people aren't public figures, wealthy or not
|
| He had a job, a bunch of kids, multiple wives, and a 250 M
| divorce, among other things.
|
| Obviously some people knew this. It just wasn't in the public
| interest, like 99.99999% of things that have ever happened :-)
| disillusioned wrote:
| One of the funny takeaways here is: there are so many more
| billionaires out there, who spend considerable effort to remain
| off these lists and otherwise anonymous. I work with one, and
| he's not on ANY of the Forbes or Bloomberg lists, though articles
| about his projects and investments obviously make the news.
| That's, as the article alludes to, the funny thing about private
| equity: it does a very good job _staying_ private.
| whatshisface wrote:
| Does the IRS know?
| kortilla wrote:
| The IRS doesn't track assets, so unlikely. They don't really
| even know how wealthy small business owners are
| ramzez wrote:
| but they track assets of common people especially overseas
| like FATCA
| cheema33 wrote:
| And then there are those who try very hard to get on the list.
| I know at least one famous one.
| shusaku wrote:
| > There are many complexities, but one popular technique is to
| put assets into trusts that allow the returns to accrue for heirs
| without taxation. Nike founder Phil Knight, for example, put his
| company's stock in a series of trusts to benefit his children.
| The trusts pay him a modest return, but the rest of the gains
| avoid incurring estate tax, including Nike shares that were worth
| $6.1 billion in 2021, Bloomberg reported.
|
| ...
|
| > Behn's clients typically want to maximize the money they leave
| for their children or establish a philanthropic legacy; some seek
| to do both.
|
| I'm sure that the numbers on these schemes work out favorably on
| paper, but if you lived through WW2 I wonder if you might be
| willing to pay a premium to give your immediate heirs maximum
| flexibility, knowing that the future is unpredictable.
| ip26 wrote:
| What are the odds of something like WWII though, compared to
| the odds it's all spent by the second generation?
| aprilthird2021 wrote:
| Normally you'd be right, but we are eerily close to a WWIII
| right now...
| drexlspivey wrote:
| This $7B is enough to fund the US Federal government for about 8
| hours
| lovich wrote:
| A single person funding a government for >330 million people
| even for only 8 hours is pretty impressive.
|
| Gives off malcador holding the golden throne for a short time
| energy
| acchow wrote:
| Or less than 2.5 days of interest payments on the federal debt
| EricE wrote:
| Yes, what a colossal waste - would have been much better going
| to charities.
| ricardobeat wrote:
| Choose your charities wisely. The average is something like
| 66% of funds going to the actual cause, and it varies wildly
| between 10% and 95%+.
| bluGill wrote:
| There is value in those other things. Administration is an
| important job - while it is justifiably looked down on
| because it is easy to bloat, there are important things
| that need to be done. And those administrators really
| should have comfortable chairs, motorized standing desks
| (yes both!), coffee, and other those other little things
| that make life in an office better.
| edm0nd wrote:
| On the flipside, imagine if they gave $7B to an anti-
| government group or militia to perform a coup or attack
| another country...
|
| That could buy a ton of arms and equipment and likely enough
| funds to be successful depending upon what the ultimate goal
| was.
| rKarpinski wrote:
| Elon Musk or another person pre-paying some of their future
| estate tax, don't buy the other angle.
| dh2022 wrote:
| The author certainly makes this a plausible explanation. And
| yet I am thinking- if this is indeed the case, why we did not
| see similar payments this size more often?
| rKarpinski wrote:
| Tax avoidance strategies aren't exactly advertised so it
| could be a novel tactic; and it probably would require an
| absurd liquid net worth to be worth pursuing (it might even
| preclude Texas billionaires like Michael Dell or Christy
| Walton)
| morpheuskafka wrote:
| Surprisingly some people are apparently advertising tax
| advoidance strategies, which is why the IRS has the
| authority to regulate "promoters" of certain schemes, such
| as a recently popular one where unuseful land is donated to
| conservation to generate a large deduction.
| IAmNotACellist wrote:
| I can't imagine something more useless than an estate giving
| money to the US federal government rather than secreting it away
| via legal tax loopholes and re-investments in new industry.
| dweinus wrote:
| TIL that in 2024 people are still trying to claim that trickle-
| down economics works. Given all the wealth at the top these
| days, I'll expect my trickle-down check in the mail any day
| now.
| chasd00 wrote:
| Giving $7B to the gov changes zero. Not a single function of
| the government will change not a single thing. They should
| have just thrown it in the trash. At least go pay off student
| loans with a lottery until the money is gone or something,
| that could help. Maybe pay all the mortgages in a small town
| or something. What they did by giving it to the gov is the
| same as setting it on fire in the front yard. It's kind of
| upsetting.
| sneak wrote:
| The logical conclusion of this line of thinking is that you
| must then believe there to be a moral obligation to always
| pay service people in cash and avoid paying taxes at every
| possible opportunity.
|
| Do I understand your position correctly?
| ilammy wrote:
| Don't put your words in their mouth.
|
| Giving government money doesn't really change the way
| government operates. The government has the budget for
| the year and that's the spending for the year. If
| government needs something done, an item gets budgeted,
| money is borrowed, and paid out to get stuff done. Giving
| money to the government only offsets the debt; _nothing
| else changes_ from that besides the number in the
| spreadsheet.
| IAmNotACellist wrote:
| Plus they'll have increased the deficit by $7B by the time
| the ink dries on the tax payment check.
| consteval wrote:
| If you take this to its logical conclusion then nobody pays
| taxes and then society falls apart. Clearly, that money
| does something.
| tastyfreeze wrote:
| Government has put up a bunch of roofs, troughs and channels
| to catch all the trickle. How much of your salary goes to
| something required by government? People making money by
| doing or making things other people want is not evil.
| Government setting up fences to protect the current winners
| is the problem.
| mcmoor wrote:
| Me in developing country sure see that billionaire's wealths
| already trickle down to developed country's citizens.
| zztop44 wrote:
| How can you be sure it's not wealth trickling _up_ instead?
| missedthecue wrote:
| I don't think you can consume your way to a higher
| standard of living. The only way to sustainably increase
| the standard of living is to increase productivity. This
| can only come from _investment_ into hard capital and
| into human capital (education).
|
| So to me, it would be very hard to make an argument that
| it trickles up. It has to come from investment. And
| investment in the private sector is usually done by rich
| people, because you need money in the first place to
| invest and also because investing well makes you rich.
| cycomanic wrote:
| Except for the fact wages and middle class wealth has not
| kept up with productivity for ages in most western
| countries.
|
| Also considering that the super-rich in developing
| nations are not that far behind the super-rich in
| developed nations, why hasn't their wealth trickled down
| and uplifted those developing nations? The reality is
| that developing nations have even higher wealth
| inequality, so refuting your argument.
| missedthecue wrote:
| Wages won't ever eat up 100% of the productivity gains.
| That defeats the point of investing in productivity
| gains. If you have ten ditch diggers, but then buy a
| steamshovel, the operator of the steamshovel earns more
| than the ditch diggers, but doesn't earn 10 salaries.
|
| I am from a developing country. There aren't a lot of
| super rich here. In fact there isn't much wealth at all.
| Having some greater gini coefficient doesn't mean you
| have more wealth, inequality really isn't a relevant
| measure.
|
| If raising wages was the only component to development,
| Somalia could simply set their minimum wage to $50 an
| hour and watch the country soar. Wages follow
| development, not the other around.
| IAmNotACellist wrote:
| You think investment = trickle down economics? Is your 401k
| trickle down economics?
| chgs wrote:
| 401k is a massive Ponzi scheme where people working today
| hope that people in the future will value their work.
|
| Imagine a world where you had 15 billionaires and 5 people
| working. How much are are. Those billions worth when they
| are fighting each other to have one of the 5 useful people
| wipe their ass in their care home?
| randomdata wrote:
| Who claims that "trickle-down economics" works? The term was
| literally coined as a joke about how it doesn't work.
| iJohnDoe wrote:
| Agreed, they should have just set $7 billion on fire in the
| middle of the street. This is an inconsequential amount to the
| US gov, but a tremendous amount to schools, communities hit by
| devastation or other terrible events, non-profit hospitals,
| etc.
| BobAliceInATree wrote:
| You literally listed all things that are funded by taxes
| (schools, FEMA, medicare/medicaid). Sigh.
| iJohnDoe wrote:
| Do you really think those taxes are spent wisely? Maybe.
| Maybe not?
| juunpp wrote:
| There is really a point to both opinions. BobAlice maybe
| lives in a place where tax funds are actually well spent.
| sneak wrote:
| This amount will be sufficient to operate the US military for
| just under four days.
| chgs wrote:
| How much of that would be spent directly on wages for people
| working for eh US military and how much sent to external firms?
|
| On the other hand how much is sent to external firms where most
| of their expenditure is in the US and thus comes back rather
| swiftly in taxes, and how much is siphoned off to overseas
| stores of wealth.
| triceratops wrote:
| Genuinely impressive. This guy's tax bill alone could operate
| the most powerful military that has ever existed for the better
| part of a week.
| ksec wrote:
| I was having this discussions the other day where my boss thinks
| these wiki list and Forbes list are some sort of ground truth.
|
| The Forbes list only include people who Forbes want it to be
| listed and / or are public record. For example Michael Bloomberg
| is included but he is not even on the Bloomberg billionaires
| list, simply because Forbes want to expose him. And there were
| plenty of Billionaires in China who wasn't listed before lots of
| information becomes public. And I would imagine the same for
| Brazil, India or lots of other countries.
|
| These list can only include people by their stock market cap or
| worth. It doesn't include people who are in the property market
| and basically own or operate via private equity. And there are
| plenty of billionaires in the property market. Along with many
| other asset that we dont even know or aware.
|
| Another thing, if a person with $10B net worth of stock for 25
| years, and the stock has been paying 3% dividends per year. You
| will still see him listed as $10B net worth. In reality he has
| $10B of dividends already. ( Although in US I think dividends are
| taxed ). And that is excluding any investment he made with those
| dividends and operate completely in the dark.
|
| Basically because the ultra wealth are so opaque I argue that
| inequality is actually much wider than we thought or what we
| could calculate.
| Jedd wrote:
| A fascinating reddit post was mentioned here about a month ago -
| about the mildly famous (if a little macabre) 'Buy, Borrow, Die'
| cycle used by the obscenely-wealthy to - multi-generationally -
| avoid tax obligations.
|
| https://old.reddit.com/r/BuyBorrowDieExplained/comments/1f26...
|
| HN comments: https://news.ycombinator.com/item?id=41408772
| frinxor wrote:
| ah missed this one, thank you!
| rufus_foreman wrote:
| Can you explain to me what a post about avoiding taxes has to
| do with a post about not avoiding taxes?
| lantry wrote:
| we regularly get comments like this, and people on HN still
| question the value of a liberal arts education
| omeid2 wrote:
| Are you joking? How is here is an extreme case of X doesn't
| relate to an extreme case of -X?
| Jedd wrote:
| I don't expect you were genuinely seeking an answer, however
| I'll point out that the crux of the mystery described in TFA
| was that it was such a rare event - someone tremendously
| wealthy _didn 't_ avoid this tax - that it was note-worthy.
| _bin_ wrote:
| This is something people love to rage about, yet it's not one
| with an obvious fix. The counterpoint is that this leaves money
| invested, which means others invest in other things, and still
| entails interest payments. It exists in part because you don't
| want someone who inherited his parents' house and wants to move
| in to go broke trying to pay taxes, or have to re-mortgage it,
| with an even stronger case with family farms.
|
| And it exists in part because there are so many legitimate
| cases for doing it, even as a wealthy person: pretend you're a
| relatively successful businessman whose company has appreciated
| to $50mm. In this world, you can't just leave your gains
| unrealized and borrow against them. So you can
|
| - Try to find somebody to sell to, which is a sketchy move. Of
| course, as your company continues to appreciate, you will be
| forced to continue reducing your ownership stake. Over time,
| this will make keeping a family business in the family largely
| impossible.
|
| - Try to find money to pay taxes. This means less money for
| R&D, for expansion, for your employees.
|
| - Just dump the whole business to private equity and move on.
|
| These all suck, and the government generally collects money on
| assets as they move not assets at rest. I see no way to resolve
| it that isn't suckier than the status quo and so am left with
| the conclusion that people who agitate for such changes are
| more resentful of the rich than they are worried about the
| justice or lack thereof of tax avoidance.
| JumpCrisscross wrote:
| Attach a lien to the property. If it's a small business, the
| government's share of the step up is put against the
| business. There will still be shenanigans. But it avoids
| forcing liquidation wile preserving the state's interest.
| ryandrake wrote:
| This actually seems like a very reasonable solution.
| Although it would lead to perpetual liens on properties
| that simply get passed down dozens of generations, never
| getting sold. At some point, the music has to stop, or the
| rich will exploit it.
| cperciva wrote:
| _This is something people love to rage about, yet it 's not
| one with an obvious fix._
|
| In Canada, assets are deemed to have been disposed of upon
| death (or gifting) so the estate pays capital gains taxes on
| the accrued profit. There are a few exemptions for political
| reasons, e.g. to allow farmers to pass appreciated farm
| property to their children tax free, but they're sufficiently
| limited that they don't cost very much.
|
| Seems like an obvious fix to me -- when the cost basis is
| stepped up, taxes are due -- and in practice it seems to work
| pretty well.
| _bin_ wrote:
| Family farms are a good example but there are still plenty
| of others like a family business. I wouldn't care to see an
| increasing fraction of assets fall into institutional
| ownership simply because people are taxed out of owning
| them intergenerationally. There's a massive difference
| between "the government will tax you for part of your
| value" and "the government will, over a sufficient time,
| tax you entirely out of even a growing asset."
|
| If the concern is how much the policy costs the nation,
| then I don't think that's a sufficient reason to change
| things either. The top 1% in America hold about 31% of a
| total $140 trillion, or $43 trillion. This is, in a very
| optimistic case, around twenty years worth of the current
| federal deficit. Given the trajectory it's taken over my
| entire lifetime I find it unlikely it would last more than
| a decade. If the concern is cost, we have a "money out"
| problem in the US, not a "money in" one, largely driven by
| our ballooning mandatory spending (much of which goes to a
| radically outsized group of old people, whose entitlements
| neither party will touch despite their outsized ownership
| of wealth) and the high interest expense that's caused.
| Even if we outright confiscated every dollar of the 1%'s
| net worth, that wouldn't represent a remotely sustainable
| solution. Hence my comment about most of these policies
| looking more like schadenfreude than a sincere desire to
| fix things.
| kelseyfrog wrote:
| Help me understand why a family farm would have such an
| issue if the owner-operator dies, but Walmart didn't when
| Sam Walton died? Is it an issue of incorporation/business
| structure?
| cperciva wrote:
| Leaving aside the fact that Sam Walton was an American
| and so his assets had no "deemed disposition" upon his
| death: Walmart is a publicly traded company, so if his
| heirs inherited a few % less of the company it wouldn't
| make a big difference.
|
| In the "family farm" (and "family business") scenario,
| we're talking about private companies -- whether
| incorporated or not, all the owners are related. If part
| of such a company needs to be sold off to pay taxes, it
| would presumably be sold to a someone at arm's length,
| which would fundamentally change the business structure
| -- just like running a startup with VC investors is
| different from running a bootstrapped startup.
| kelseyfrog wrote:
| Couldn't family farms plan around such an event
| occurring, either by having the cash on hand to pay taxes
| or through some sort of insurance?
| bluGill wrote:
| Where does that cash come from? Family farms often are
| worth millions on paper, but it is all land. There
| typically isn't that cash. And the way tax laws and
| inflation works you are discouraged to not keep that kind
| of cash on hand - there is no place to save it that keeps
| pace with inflation after taxes that is low risk (If
| everyone tried this you will hear horror stories about
| someone who puts the money aside and then the parents die
| so it is needed but the market is down and so they lost
| money)
| kelseyfrog wrote:
| Thank you. I feel like I understand the structure better
| now
| NoMoreNicksLeft wrote:
| In the particular example of a "family farm" (mostly
| extinct since the 1970s in any meaningful way), profit
| margins were always slim. Furthermore, life insurance for
| grandpa isn't likely to cover the difference... the real
| estate value of smallholdings is positively astronomical
| in many cases (acreage alone does this, but it's often
| high quality land in many ways).
|
| There's not many plausible routes to "paying the
| millions-dollar death tax so that developers don't turn
| the cornfield into a suburb" in such scenarios. Mostly
| moot though, this all played out and was over before most
| of us were born. I suppose there are gigantic 20,000
| operations that "won't stay in the family"... but those
| farmers:
|
| 1. Aren't really living on the same piece of land that
| they farm
|
| 2. Having to sell off 1500 acres to pay the tax bill
| doesn't much affect their operation except that it's
| slightly smaller
|
| 3. Have someone custom combine it anyway... they're
| basically a management company that hires a bunch of
| contractors
|
| 4. Generally are incorporated in such a way that sole
| ownership hasn't been an issue since great-great-granpa
| died back in 1961
|
| Family farms are, at this point, largely mythological.
| asne11 wrote:
| Suppose you're a young 20 something with maybe $300 to
| your name. Daddy gets struck by farming equipment and
| dies. Now you have two choices:
|
| 1. Continue operations of the family farm, assuming you
| can come up with the money to cover taxes.
|
| 2. Sell the farm to Big Farm, Inc., get a $5M check and
| forget about it, regardless of the consequences that
| means to your customers.
| consp wrote:
| The taxes are less than buying the farm outright so it
| would just be a very cheap buyout. I do not see the
| problem, you can get finance for that in civilized
| nations. It's not easy but neither is buying a farm
| normally.
|
| Inheritance, even with normal tax, is a cheap way of
| keeping money in the family and keeping rich people rich.
| It is not based on merit, capabilities or need and serves
| no purpose in a society based on improving the lives of
| the entire population. (Which you can argue is not what
| [country with low inheritance tax] is)
| cperciva wrote:
| _[inheritance] serves no purpose in a society based on
| improving the lives of the entire population_
|
| I would say that society is served well by the ability of
| widows to inherit and not be left destitute. Similarly
| for minor children.
|
| If you're talking specifically about inheritance by adult
| children, I agree the arguments in favour are weaker.
| kelseyfrog wrote:
| Is there no system which can provide for widows and minor
| children yet isn't able to be taken advantage of by the
| hyperwealthy?
| brnt wrote:
| Here in the Netherlands the (once setup as) farmers coop
| bank is notorious for not doing that, they heavily favour
| bigco and business models that capture subsidies
| effectively (which usually means scaling one part to
| ridiculous proportions).
| lowkey wrote:
| Amd this is why there are no mid-sized family businesses
| remaining in Canada, except for the occasional farm.
| Billionaire oligopolies are all that remain as only they
| are sustainable in the tax farm once known as the great
| white north.
| bdndndndbve wrote:
| Billionaire oligopolies are everywhere, this isn't a
| uniquely Canadian problem. TFA points out we live in an
| era of Gilded Age inequality.
| eastbound wrote:
| So you create a startup.
|
| - The first year it has 10kEUR ARR.
|
| - So it is worth 100kEUR. You must my pay 30kEUR in capital
| gains taxes.
|
| Like this, every year? Every time it has more revenue, it
| multiplies its future worth, therefore multiplies it FMV,
| therefore you must pay the CG on the multiple of your
| income?
| cperciva wrote:
| Only if there is a "deemed disposition". Which in most
| cases happens when the owner dies.
|
| You probably don't need to worry about this happening
| multiple times.
| metacritic12 wrote:
| The obvious fix is to not step up basis on death.
|
| The estate tax already means that the estate of a person who
| dies may need to sell / divide / split stuff to pay the
| government. There already is no fundamental protection for an
| asset passing unscathed from a parent to a child. I don't see
| how not stepping up basis qualitatively changes this.
|
| And your argument of "you want a child to be able to inherit
| a family business / house and keep the family business
| protected" is incredibly axiomatic and the antithesis of a
| tax. While it's inherently consistent, you're making the same
| general argument as "all taxes are theft".
|
| Yes taxes may be theft in one view, but under our current
| society, raising revenue for the common welfare is also a
| virtue, so we can't have have it both ways.
| geysersam wrote:
| It's a funny argument the one about the family farm. In
| this case it's not even about inheritance tax. It's a sob
| story about a guy who couldn't inherit the farm because his
| dad owed the state money because they had let him not pay
| tax on his capital gains for a long time.
|
| Sorry for not tearing up.
| gammarator wrote:
| It also rarely applies to farms.
| https://www.cbpp.org/blog/the-myth-that-the-estate-tax-
| threa...
| _bin_ wrote:
| You can't just arbitrarily set the status quo that way,
| can't just sneak a premise that the state has default a
| right to collect a piece of arbitrary appreciation on an
| asset (as all assets are used for speculation) when the
| owner hasn't actually gotten cash from that, and that any
| government that _doesn 't_ tax that is just cutting
| someone a break on something rightfully owed. The state
| of nature is no tax, and as it's unpleasant, we create
| societies and fund them with taxes that we must
| deliberate and determine to be just and reasonable. You
| don't get to argue from the point that your preferred
| taxation regime is simply how things should be and that
| how things are is therefore wrong, especially not without
| a justification.
|
| I'd also point out that people's assets have gone up in
| _nominal_ terms in the past few years, but for many that
| 's not reflective of an increase in purchasing power.
| Much of that increase is due to excess inflation from the
| profligate overspending of our past two administrations,
| so the cycle currently looks like this: government prints
| money and causes inflation -> your assets are "worth
| more" -> taxman says "give me a piece of that" even
| though your real wages have fallen or have just barely
| recovered to pre-2020 levels. And of course, even if we
| index to inflation, that will necessarily hit the poor
| harder: food and energy are deemed "too volatile" to
| include in headline CPI, but as necessities, they
| comprise a larger part of poor households' spending and
| so inflation will hit them harder than the numbers
| suggest.
| Log_out_ wrote:
| yes, we can. the whole premise of a democracy is that
| every law is a solid majority away from being turned
| over.one of the reasons big money is inherent anti-
| democratic.
| _bin_ wrote:
| Okay, I don't actually believe in that form of democracy.
| Not all things that are legal are good, therefore we
| should set constraints on what the majority can do. I'd
| describe your system as closer to mob rule. And no, that
| is not the premise of every system that incorporates
| democracy as an element, it's the premise of an absolute
| democracy.
| FactKnower69 wrote:
| >I'd describe your system as closer to mob rule.
|
| lmfao this is always, always, always the refrain
| jjav wrote:
| > therefore we should set constraints on what the
| majority can do
|
| Which inevitably leads to the question: who should get
| the power to do that and why they, specifically?
| pdonis wrote:
| You have it backwards. The actual question is, how did
| the majority magically get the power to enforce its will
| on the minority in the first place?
| kjkjadksj wrote:
| The majority held this power as long as we've been a
| social species. Even a Pharaoh lives with consent of the
| majority even if they've convinced that majority they are
| divine.
| chairmansteve wrote:
| Maybe the question is, how are the wealthy magically
| protected from the mob?
|
| The answer is, some form of government protects them. And
| that form of government is going to want it's tribute.
| MisterBastahrd wrote:
| Violent revolution, mostly.
| jjav wrote:
| > You have it backwards. The actual question is, how did
| the majority magically get the power to enforce its will
| on the minority in the first place?
|
| This doesn't answer my question at all.
|
| Who should decide those limits, and why they? Who pics
| them?
|
| Think of a thought experiment: A new
| city/town/state/country is getting started (let's assume
| peacefully somehow, this is a thought experiment).
|
| Who gets to set those limits on democratic action?
|
| One choice that comes to mind is everyone gets together
| and pics the wisest person in the crowd = representative
| democracy.
|
| Another choice is the strongest bully in the group beats
| everyone up and sets the laws however he likes =
| dictatorship.
|
| What other choices? And which one should be best?
| pdonis wrote:
| _> This doesn 't answer my question at all._
|
| I wasn't trying to answer your question. I was pointing
| out that your question presupposes that the majority has
| the power to enforce its will on the minority. It doesn't
| even consider the possibility that the majority having
| that power is not a law of physics, it's a social
| construct, and a society does not have to adopt it.
|
| _> A new city /town/state/country is getting started
| (let's assume peacefully somehow, this is a thought
| experiment).
|
| Who gets to set those limits on democratic action?_
|
| Again, you're assuming that what gets started is a
| city/town/state/country as a political entity, with the
| ability to enforce its will on its residents, and then
| asking how that power gets regulated.
|
| You're not even considering the possibility of a
| community getting started without _anyone_ having the
| power to enforce their will on others, with everyone
| having to deal with everyone else as an equal, and nobody
| having any "governmental" powers.
|
| Historically, such things have happened. For example,
| saga period Iceland went for several centuries without
| anyone having governmental powers. Some of the American
| colonies in the late 1600s and early 1700s--Pennsylvania
| is a good example--had effectively no one having
| governmental powers, since while there was nominally a
| "goverment", it had no ability to enforce its will on
| residents. These are "other choices" that your question
| doesn't even comprehend.
|
| What happened in those cases? Historically, those
| societies did fine as long as they were left alone. What
| eventually ended them was outside interference. Saga
| period Iceland ended up conquered by Norway. Pennsylvania
| ended up having its regime tightened up by the British
| after the French and Indian War (as part of a general
| tightening up on all the American colonies).
| tsimionescu wrote:
| There is no mystery here. The majority has the physical
| power to force the minority to do what they want (at
| least if the difference is big enough). This is an
| objective, measurable power, not some theoretical concept
| or moral right. It's not magical, it very much comes from
| physical laws, like fists and clubs.
| keybored wrote:
| Of course no one is surprised.
|
| > therefore we should set constraints on what the
| majority can do.
|
| The constraints are supposed to be a constitution and
| time. In time, as people die and new people are born, the
| world changes. New people are in charge. They can even
| rewrite the constitution.
|
| What other alternative is there?
|
| > I'd describe your system as closer to mob rule.
|
| "Mob rule" is just the pejorative anti-democrats use for
| democracy not going their way.
|
| What's a rule-by-rich-people pejorative? Pig-rule? Just a
| pejorative. Just as meaningless.
|
| Anti-democrats don't have rational arguments on their
| side. Therefore they have to invent specters of the
| pitch-forked mob who is killing babies in the streets,
| the desperate, unwashed...
|
| But all of that begs the question: if the "mob" rules,
| why are they in the streets? With pitch forks? Desperate?
| Of course it is completely irrational. If the "mob"
| already ruled _there would be be no mob_ because the
| average person would enjoy dignity and respect. Safety
| and security.
|
| They would have enough means to appear upstanding. Like
| you know, those rich people who rule now or ruled in the
| past. Those who never had to excuse themselves for being
| part of a mob or being unclean.
|
| But it's clear that if you _want_ people to be desperate
| and in the dirt then you also don't want them to rule.
| That's how you get a mob.
| freejazz wrote:
| Really? We're a 'solid majority' away from murder being
| made legal?
| witchammer wrote:
| > The state of nature is no tax
|
| > You don't get to argue from the point that your
| preferred taxation regime is simply how things should be
|
| Those two statements seem mildly contradictory.
| _bin_ wrote:
| Not really. Trace the course of history and the natural
| state of man is much closer to what Hobbes described. In
| the wild, homo sapiens doesn't have a taxation system. As
| we built up civilizations, we created taxes as I
| described. And neither am I arguing for my preference to
| stick with how we mostly run our taxation regime (tax
| value when moved, not value at rest) without some
| justification for it.
| consp wrote:
| No tax in the wild? In my view, sure there was: you get
| water and share it, the other guy hunts and shares it.
| The fact no centralised system existed does not mean no
| tax on the community was levied in some way.
| mbrumlow wrote:
| I don't believe sharing was all that common. But the
| difference in your story is voluntary sharing.
|
| Once the hunter demands water for meat it becomes an
| exchange, and is the basis of our capitalist society.
|
| Taxes in that system would be more like 10 men who did
| not hunt or gather demanded you give them food and water
| or they would beat your face in.
| supplied_demand wrote:
| ==Taxes in that system would be more like 10 men who did
| not hunt or gather demanded you give them food and water
| or they would beat your face in.==
|
| This seems a little dramatic. Are the 10 men demanding
| food and water also building roads, cleaning the water,
| removing waste, educating children, protecting collective
| assets, or any of the other things that Governments do
| with collective taxes? If not, the analogy falls apart.
| gperkins978 wrote:
| The state of nature has no schools, no water, no sewer
| and no police. If one is going to live in a civilized
| nation, he should pay his share of taxes. Capital gains
| is 15%. That is not an outrageous amount. Everyone should
| pay because everyone benefits. One is free to leave and
| live in tax shelter principality or Sultanate.
|
| There is a problem with high taxes on earned income, but
| anyone complaining about the 15% capital gains tax has
| problems. The estate tax only applies to this who are
| very, very fortunate. These are not even earned. Again,
| if one hates his country, he can move to Dubai, Bermuda
| or the Glorious Sultanate of Brunei and enjoy their
| lifestyle.
|
| I do understand that people in California get angry
| because the state is so poorly run, but most of the US
| has easily avoided the self-created problems of
| California and New York city.
| supplied_demand wrote:
| ==most of the US has easily avoided the self-created
| problems of California and New York city.==
|
| Two places which produce an outsized share of the
| country's businesses and wealth? Seems like they are
| doing something right.
| FactKnower69 wrote:
| >You can't just arbitrarily set the status quo that way,
|
| huh, what natural, physical laws are being broken?
| collecting taxes exceeds the speed of light or goes below
| 0K or something?
| TheCoelacanth wrote:
| > The state of nature is no tax
|
| The state of nature is no property. Billionaires can't
| exist without a government enforcing their property
| rights. Why shouldn't they pay the entity that made it
| possible for them to accumulate their vast wealth?
| bluGill wrote:
| The state of nature is it is your property so long as you
| can protect it. There are lots of different ways to do
| that. Many animals have concepts of owned territory which
| they protect in various ways.
| jncfhnb wrote:
| And you principally protect your property by... wait for
| it... paying taxes to the state to uphold law and order
| bluGill wrote:
| That is not the state of nature though. There are
| "primitive" societies that don't organize their village
| that way. Social pressures and you working alone are
| enough to protect your property when the total population
| to worry about is around 100 people.
|
| We use taxes because nature doesn't scale to towns of
| 1000, much less nations of millions. But that is not the
| state of nature.
| Wytwwww wrote:
| The concept of property (the way we understand it i.e.
| all the stuff besides of a handful of personal items) is
| not something that generally exists or existed in
| "primitive" societies.
|
| i.e. you can't really "own" more land than you and your
| family can personally farm and extract rent on it without
| a state to protect your claim.
| fluoridation wrote:
| You can if you can convince others to protect it for you.
| TheCoelacanth wrote:
| And even much later under feudalism, property as we know
| it didn't really exist. Land (essentially the only
| productive asset that existed) was owned by the
| government, but the government was a loose network of
| aristocrats instead of a faceless state.
| mmcdermott wrote:
| While I'm sure that someone somewhere objects to paying
| for law and order, I think most tax grumbling comes from
| taxes rising (and, arguably, still not rising enough) to
| pay for bigger and bigger programs with an increasingly
| tenuous relationship to law or order. Not everyone
| objects to every line item, of course, but the bigger the
| budget gets the more certain it becomes that those rising
| taxes are not just to keep up with inflation on basic
| essentials.
| jncfhnb wrote:
| Yes that is the nature of compromise
| arrosenberg wrote:
| > I think most tax grumbling comes from taxes rising
| (and, arguably, still not rising enough) to pay for
| bigger and bigger programs with an increasingly tenuous
| relationship to law or order.
|
| The Constitution addresses this confusion in its'
| preamble. The role of the government includes law and
| maintaining order, but it extends further -
|
| "We the People of the United States, in Order to form a
| more perfect Union, establish Justice, insure domestic
| Tranquility, provide for the common defense, _promote the
| general Welfare_ , and secure the Blessings of Liberty to
| ourselves and our Posterity, do ordain and establish this
| Constitution for the United States of America.
| AnthonyMouse wrote:
| A perfectly valid way of reading "promote the general
| welfare" is as a _constraint_ on the government, i.e. it
| shouldn 't do anything not consistent with that premise,
| not that it's empowered to do anything that is. The
| latter would be inconsistent with the overall
| architecture of the constitution as setting out a
| government of enumerated powers.
|
| But the preamble to the constitution isn't legally
| binding anyway.
| arrosenberg wrote:
| Even if you read it that way, it's not really a
| constraint. If I believe socialized healthcare improves
| the general welfare, then even your reading implies that
| it's something the government should be allowed to do.
| Maybe you don't think that should be it's overriding
| purpose, but I don't see how it constrains.
|
| > But the preamble to the constitution isn't legally
| binding anyway.
|
| No one said it was, but the intent of the framers, at
| least, is very clear - the government should do things
| that promote the general welfare, not merely establishing
| rule of law and enforcing civil order.
| NoMoreNicksLeft wrote:
| Given that most billionaires have their billions as
| imaginary ownership of gigantic corporations, how exactly
| would someone steal their shares from them such that
| government needs to enforce their property rights? Can I
| just walk up to the bank and say "hey, I have $100
| billion worth of Facebook stock, gibs me da money"? You
| know, but for the feds swooping in (or possibly the
| Delaware state troopers) and shutting that down?
|
| The government may indeed enforce property rights in a
| meaningful way, but it doesn't seem like it's doing this
| for billionaires.
|
| > Why shouldn't they pay the entity that made it possible
| for them to accumulate their vast wealth?
|
| If this were indeed a true description of how that
| process occurs, why are you so comfortable with letting
| the government "make that possible"? Where in the
| Constitution (or even common law) does it grant the
| government this power?
| ForHackernews wrote:
| > ...most billionaires have their billions as imaginary
| ownership of gigantic corporations
|
| Exactly. The entire notion of their wealth is predicated
| on an elaborate system of law and governance! Otherwise,
| it's all just freaking numbers on a computer.
| Wytwwww wrote:
| > Can I just walk up to the bank and say "hey, I have
| $100 billion worth of Facebook stock, gibs me da money"?
|
| No, but assuming you are on Facebook's board / in upper
| management you can conspire with the rest of the board to
| get rid of Zuckerberg (possibly permanently) and share
| the company amongst yourself.
|
| ARM China seems like somewhat close example of what can
| happen when there is no government willing to protect
| property rights. e.g. as long as he has enough local
| support a CEO of your subsidiary could just take over the
| entity and there would be nothing you can do about it.
|
| IMHO we'd end up with some dystopian form of Cyberpunk
| style techno feudalism without strong governments
| regulating everything. Which in theory might be a good
| thing for the corporations themselves, just not for most
| of the people who are currently running them.
| NoMoreNicksLeft wrote:
| > No, but assuming you are on Facebook's board / in upper
| management you can conspire with the rest of the board to
| get rid of Zuckerberg (possibly permanently) and share
| the company amongst yourself.
|
| Yes, if you want to oust him and take over as CEO, then
| boards of directors have that power. But that's more
| about his job security. When he leaves, he leaves with
| just as much stock as he ever had, and in the case of
| some termination clauses in contracts for that stuff, he
| walks away with more than he walked in with.
|
| With the government out of the picture, this doesn't much
| change. If the board of directors tries to confiscate
| shares or some equivalent (I dunno, withholding
| dividends? Does Facebook even pay dividends?), then their
| stock price tanks immediately. Somewhere down near $0.
| Their financing falls apart shortly after that, and
| pretty soon the company goes under. The punishment for
| some group _stealing_ Facebook isn 't government goons
| stepping in and bashing skulls, it's in the complicated
| structures that make it worthless just about as soon as
| it's stolen.
|
| I think your Chinese example is quite the opposite of
| this. The government of China basically has to step in
| and allow ARM China to pull such a stunt, or it's
| impossible.
| Wytwwww wrote:
| > Somewhere down near $0.
|
| > complicated structures
|
| I guess. But I just don't see how could the stock market
| (in its current form) or most of those complicated
| structures exist without governments. Of course it's a
| silly discussion since Facebook in its current form
| (including corporate and ownership structure) wouldn't be
| a thing without all of that.
|
| > in the complicated structures that make it worthless
| just about as soon as it's stolen.
|
| Facebook is still highly profitable, arguably without any
| government regulation it could be even more profitable.
| Why share any of that value with the shareholders who
| can't really sue you or do anything else? Sure if you did
| that nobody would trust you if you started a new company
| and were looking for investors (which is why Facebook
| wouldn't exist in the first place in a system that allows
| that) but that doesn't really matter if the government
| suddenly disappeared.
|
| Not saying that Facebook's upper management would
| immediately try pulling off something like that it's just
| seems like the natural long-term outcome.
| Political/social instability is usually already priced
| in, so FBs valuation would collapse just because
| something like that became an option regardless of
| Meta's/FB's intentions. At that point the cost of
| "confiscating" shares or similar shenanigans wouldn't
| really be that high since being in direct control of the
| company would be worth a whole lot more than owning some
| theoretical share of it.
|
| > allow ARM China to pull such a stunt, or it's
| impossible.
|
| Why? What could ARM/Softbank do if their Chinese
| subsidiary decided to just ignore them while continuing
| to use their IP. Of course their whole business model
| couldn't exist in the first without any way to enforce
| contracts since the companies actually manufacturing the
| chips would just steal that IP themselves.
| tsimionescu wrote:
| Imagine the government went away tomorrow. Would Mark
| Zuckerberg's employees keep giving him any kind of money
| for the work they are doing? Would they even give
| Facebook money, or would they just emit invoices with
| their own bank accounts as the destination?
|
| Billionaires absolutely depend on a very robust system of
| laws to maintain control of the giant corporations that
| they own. Zuckerberg couldn't even enter a Facebook
| building if his employees rebelled against him and the
| law wasn't protecting him.
|
| Note, I'm not trying to single out Zuck in any way, just
| wanted to pick some billionaire tied to a well known
| corporation to make the examples simpler.
| nemothekid wrote:
| > _Given that most billionaires have their billions as
| imaginary ownership of gigantic corporations, how exactly
| would someone steal their shares from them such that
| government needs to enforce their property rights?_
|
| You have it backwards. "imaginary ownership of gigantic
| corporations" doesn't exist without government. The
| government doesn't "protect" Zuckerbergs shares, the
| government is the vehicle that gives Zuckerbergs shares
| value. Without the government Zuckerberg's billions is
| worthless.
|
| In this fairytale world where Zuckerberg is somehow made
| a persona non grata, then all his shares would become
| worthless as he wouldn't be able to sell them, nor would
| he be able to enforce Facebook (the entity) to do
| anything on his behalf.
| lazide wrote:
| Eh, the oldest form of government is a Kingdom.
|
| If a government won't enforce others rights to property,
| eventually someone is going to form a government where
| everyone's things are theirs eh? Since what other option
| do they have if they want to own something.
| jacobolus wrote:
| That's fine. Such people can renounce their citizenship
| and pay the required exit tax, convert all their assets
| to gold bars or whatever, and go move somewhere in the
| world without a functioning state, where they can hire a
| private militia, build their own basic infrastructure,
| etc.
| lazide wrote:
| why would they do that when they can take over the gov't
| and steal everyone else's stuff? (see Russia, Venezula,
| China, and many others)
|
| Notably, the biggest thefts seem to happen when they can
| convince people that the gov't is doing it for 'the good
| of the people', and they're 'going after the rich
| people', and then they can pocket it when no one is
| looking.
| CPLX wrote:
| We (almost) invariably tax money when it changes hands.
| Like if you own something and then I own it, there's a
| tax. If I give something of value to someone else, the
| government takes a cut.
|
| There's a ton of nuance there, sometimes intended to
| avoid certain negative consequences that feel like double
| taxation or that provide peverse incentives. But that's
| the general premise.
|
| If you pay taxes on your income and then use it to buy
| something from me, I have to pay taxes on it too. That's
| my income now.
|
| If my father paid taxes on something he earned that's his
| tax bill. When I get it, I have to pay too. That's my
| income now.
|
| This is very clear and consistent. Outside of all the
| people with an interest in pretending otherwise.
|
| Also worth noting that there's no state interest
| whatsoever in preserving generational wealth. Just none.
| The fact that kids have to earn their own money instead
| of a family coasting for generations is a _good thing_
| for the most part.
|
| There are some plausible arguments for preserving
| continuity in certain cases, like community based family
| owned businesses, farms, that kind of thing. But
| everybody already agrees with that which is why those
| kinds of things have been generally exempt from estate
| taxes for generations. The people telling you otherwise
| are trying to trick you into caring about their agenda,
| which is how to not pay taxes on their substantial
| wealth.
| logifail wrote:
| > We (almost) invariably tax money when it changes hands.
| Like if you own something and then I own it, there's a
| tax [..] But that's the general premise.
|
| I appreciate HN is USA-centric, but over on this side of
| the pond it's nowhere near as simple as that.
|
| > If you pay taxes on your income and then use it to buy
| something from me, I have to pay taxes on it too. That's
| my income now.
|
| Except that companies - even one person companies(!) -
| generally pay taxes on their profits, not their total
| income or revenue.
| tsimionescu wrote:
| All companies almost everywhere absolutely pay taxes on
| revenue, in the form of sales tax / value-added tax.
| CPLX wrote:
| > I appreciate HN is USA-centric
|
| We're commenting on a specific article written about the
| US tax system. The term "US" is in the title of the post
| I am commenting on.
| Wytwwww wrote:
| > The state of nature is no tax, and as it's unpleasant
|
| Being able to accumulate capital, at least without having
| to resort to extreme violence is also about as
| "unnatural" as it gets..
|
| No taxes = No government = No excess (above subsistence
| level) accumulation of assets
| entropicdrifter wrote:
| And the people who have a strong drive for the
| accumulation of capital/assets build armies and those
| armies shake down subsistence-living people for food and
| supplies in order to sustain themselves and suddenly
| you've got taxes again
| Wytwwww wrote:
| Yes, thankfully modern liberal(ish) democracy(sort of)
| and the rule of law allowed us to exit this circle
| (well.. at least brought us much closer to that point
| than we ever were).
| logifail wrote:
| > Being able to accumulate capital, at least without
| having to resort to extreme violence is also about as
| "unnatural" as it gets..
|
| (This is a genuine clarifying question, because I'm
| struggling here) are you suggesting that saving is
| somehow unnatural?
| AnimalMuppet wrote:
| I believe that the claim is this: In the long scope of
| history, being able to accumulate money without having to
| be strong enough to defend it is really rare.
| Wytwwww wrote:
| > that saving is somehow unnatural
|
| Depends on how you define saving. Hoarding perishable
| goods is of course a pretty natural behaviour but that
| only scales so much. Investment (i.e. owning more land or
| other productive assets than you can utilize directly
| yourself) seems pretty as opposed to communal ownership
| seems pretty "unnatural".
|
| Not that I'm somehow implying that "natural" (whatever
| that really means, since using violence and coercion
| certainly seems like natural human behaviour) is somehow
| always superior to the opposite.
| jancsika wrote:
| > You can't just arbitrarily set the status quo that way,
| can't just sneak a premise that the state has default a
| right to collect a piece of arbitrary appreciation on an
| asset (as all assets are used for speculation) when the
| owner hasn't actually gotten cash from that, and that any
| government that doesn't tax that is just cutting someone
| a break on something rightfully owed.
|
| That's a great point.
|
| But note that you also cannot arbitrarily jump so far
| back in an _implied_ chain of premises as if to suggest
| that you 've somehow build your own (suspiciously
| libertarian-leaning) argument from first principles. For
| example:
|
| > The state of nature is no tax
|
| Well, the state of nature is also tribalistic. But
| imagine someone making an argument that collectivizing
| the farm in question is right because _the state of
| nature_ is humans living in a collective.
|
| You'd rightly reject such an appeal to nature in that
| case. Therefore, you should reject your own appeal above.
| Rebelgecko wrote:
| When should he have paid his capital gains tax? Had the
| farm changed hands back and forth?
| MisterBastahrd wrote:
| Not even sure why I should be upset in the first place.
| If I get fired from my job, nobody is going to run to my
| aid crying that I deserved that job because my daddy
| worked really hard to put me through school (he didn't,
| but that's besides the point) and he wanted me to have
| it. No, I just get fired. How is a family farm any
| different? It's just an asset. Birthrights shouldn't
| exist past citizenship.
| lazide wrote:
| Because the idea of leaving something to your kids (and a
| legacy beyond oneself) is a fundamental motivator for
| most people?
| SR2Z wrote:
| Boo. That's not what's at stake here; people don't wanna
| pay taxes that are fairly owed to the government.
| Slava_Propanei wrote:
| The asset has not moved outside the family, has not been
| sold, no profit on sale has been realized.
|
| You think a profit transfer has been made, because you
| think in terms of atomized individuals with no family.
| MisterBastahrd wrote:
| Citizens are taxed as individuals, not families. A person
| did not have assets, and now they do. I don't care that
| the land was "in their family." If they are even decent
| at managing their assets, then they will have more assets
| when they die than when their parents did. And if they
| don't, then it's not my concern. I don't believe in
| government policies to perpetuate generational capital
| wealth, and I will vote against them as long as we have a
| system where money can be used to influence the
| government.
| lazide wrote:
| Literally the comment I am replying to is about making it
| so no one can pass on property to their kids.
| MisterBastahrd wrote:
| You can make that claim, but the fact of the matter is
| that the US is a representative democracy, and our
| elected representatives make the laws. We are free to
| choose other people for the job if we want different
| laws. The vast majority of people were not lucky enough
| to be in a situation where their bumpkin ancestors just
| happened to possess a large swath of land, and so we
| don't vote to protect large swaths of inherited land.
|
| They owe taxes? They can pay them. They can afford to pay
| them because they have inherited assets. "Oh no, they're
| gonna get a diminished inheritance. What a disaster." I'm
| not getting one, and neither are most of the people in
| the country. They'll still have their inheritance, they
| just won't have the land. And they aren't entitled to it
| if they don't have the money to pay their taxes.
| _bin_ wrote:
| There's also no fundamental reason for the state to
| institute any form of estate tax; on the contrary, I
| specified it goes against our usual federal regime of
| taxing value as it's moved rather than value at rest. If
| anything, I'd question why you believe there's some
| inherent reason or right to have any form of estate tax,
| let alone to the point one forces liquidation of assets.
| One form of taxation can be more or less just than another
| and it's much easier to make the moral case for using force
| to collect a portion of value moved through government
| infrastructure (banking system, roads, ports, etc.) than
| something that remains unsold.
|
| I didn't say taxation is theft and would rather you didn't
| put words in my mouth. You're assuming I'm against any form
| of taxation whatsoever on a moral basis, which isn't
| actually true. I think there are values reasons (most of us
| actually like the idea of a family business staying in a
| family, not getting sold to private equity) and moral
| reasons why we should continue resetting the tax basis of
| inherited assets. As a compromise position, I think it
| would be more reasonable for you to suggest removing the
| stepped-up basis but not counting inheritance as a taxable
| event.
| pintxo wrote:
| I don't get you intro argument. An estate tax is like the
| poster child of value moved: from the parents to the
| children. In contrast to a wealth tax.
| mbrumlow wrote:
| I can see the reasoning. But the value did not really
| move. As the estate is family owned. The family did not
| die, a member of it did.
| dwater wrote:
| Seems like splitting hairs to me. If the estate is put
| into an LLC or similar then the death of a member doesn't
| involve movement of money. If the estate is owned by an
| individual and then inherited by their beneficiary then
| money moved from the deceased to the living. The Family
| is not a legal unit; the beneficiary doesn't have direct
| benefit of ownership while the owner of the estate lives.
| tsimionescu wrote:
| By this logic, if I sell you a car, no money moved,
| because both the car and the money are still owned by the
| both of us. Or at least, if you're brother takes your
| car, you can't ask the state to give it back to you, as
| the car didn't really move, it's still in the family.
|
| A family is not a single entity under any law in any
| country I know of. Certainly not in the USA or anywhere
| in Europe.
| tim333 wrote:
| I'm not sure that's a very good fix because the data of how
| much was paid for the assets may not be available after
| their owner is dead. The system in the UK seems to work ok
| for the most part. No CGT on death (the equivalent of step
| up basis in the US) but 40% inheritance tax on most of the
| assets over PS325K.
|
| We do have the odd exemptions like Clarkson's Farm which
| was bought partly for inheritance tax avoidance, but you
| don't have to do that.
| eli wrote:
| What would the owner have done if they decided to sell
| the assets shortly before death? Either they can
| establish a cost basis, or the basis is assumed to be $0.
| I don't see why this is a big problem.
| svara wrote:
| > The obvious fix is to not step up basis on death.
|
| And that's how it's done in many parts of the world, works
| perfectly fine. There's really no reason to step up basis
| except to provide that loophole, which is probably exactly
| the reason it's done.
| fallingknife wrote:
| You missed the obvious one - borrow against the asset to pay
| the tax.
| _bin_ wrote:
| I mentally bucketed that in "try to find money": if you're
| not selling equity, debt is one way to do that. But the
| caveat - less money for R&D, expansion, and employees -
| still applies.
| a_c_s wrote:
| Not really, nobody goes "ooh, the stock price is up 5%
| this year, we can hire 5% more employees!"
|
| Most stock wealth isn't doing anything for the company.
| If the stock price of Apple went down by 90% tomorrow for
| no reason, the main effect on Apple would be... almost
| nothing.
|
| The employees who get equity compensation would be mad
| but they don't use their stock value to fund R&D or
| expansion or salaries.
| Detrytus wrote:
| But if you have "unrealized gains" tax you should also
| have "unrealized losses" tax deduction.
|
| Also, instead of Apple try imagining NVIDIA: their stock
| went up like 1000% in two years, they are now a trillion
| dollar company. If they had to pay tax on that it would
| bankrupt them. Or, they could use all their cash + borrow
| some money against the stocks to pay tax. But then the
| stock can suddenly crash 90% and the lenders, seeing how
| their collateral is now 90% down might start demanding
| repayment of the loans, again, bankrupting the company.
|
| "Unrealized gains" tax simply does not make sense. It's
| just greedy government attempt to squeeze more money from
| businesses.
| geysersam wrote:
| > The counterpoint is that this leaves money invested, which
| means others invest in other things,
|
| This is a bad argument. Taxes are also money invested, in
| schooling, infrastructure, etc.
|
| It's a very common fallacy of people criticizing public
| spending to point to the stock market and say "Look! Imagine
| how rich we would be if we had just invested the public
| spending instead." Completely falling into the trap of
| discarding the value growth of public investments just
| because they are not measured and advertised the same way.
| sologoub wrote:
| > Taxes are also money invested, in schooling,
| infrastructure, etc.
|
| Not presently. Most tax dollars are spent elsewhere and
| infrastructure/education get less than 7%:
| https://fiscaldata.treasury.gov/americas-finance-
| guide/feder...
|
| Even that spending is not effective. Drive California roads
| and you'll often see fixes that aren't much better than the
| damaged roads they replaced. And let's not talk about our
| wonderful train projects...
|
| In theory, this money would make a lot of difference. In
| practice, it's heartbreaking.
| geysersam wrote:
| It's invested. In infrastructure, schooling, endless wars
| on foreign soil, etc. You not agreeing with the quality
| of the investment is a separate issue. You probably don't
| agree with every investment in the private sector either.
| bruce511 wrote:
| Most tax dollars go to social security, health (including
| medicare) interest and defence.
|
| So on the one hand, very little of that is
| infrastructure. Mostly it seems to go on "keeping people
| alive".
|
| Now sure, the govt could invest the money instead, and
| let a bunch of (mostly old) people die.
|
| In our "money" equation, old people have little practical
| value (and there's no line in our fiscal analysis for
| measuring our humanity).
|
| Which perhaps is why it's best not to evaluate returns on
| govt spending the way you would measure returns on
| personal investments.
|
| [As a PS I'd add that all those taxes, flowing back to
| the old people, is flowing back into the economy, which
| is what keeps businesses in business, and keeps those
| share prices going up.]
| _bin_ wrote:
| Nevertheless, welfare for olds is in no way an investment
| when those same individuals have reached the end of their
| productive years and have a decade or two to live. The
| point was that calling taxes "an investment" is largely
| untrue when most tax dollars don't go to anything of the
| sort.
|
| Social security and medicare are not means-tested in any
| way whatsoever. In fact, they are massive welfare
| programs that make our budget structurally unsustainable
| to give money to the demographic that has had the most
| time to build up wealth and assets. Around one-third of
| all US wealth is held by Americans over seventy years
| old. Perhaps instead of an estate tax, we should explore
| having those well-off seniors use their savings and home
| equity instead of demanding government funds. Not to
| mention decades of subsidizing housing demand has
| drastically inflated housing prices, and younger
| Americans are now paying many of these retirees several
| times what those properties went for decades ago, an
| increase well in excess of inflation. In other words,
| through multiple channels, the young are being sucked dry
| by the old, despite the fact that the old hold a huge
| chunk of wealth.
|
| I'd also point out old people are a terrible way to feed
| money back into the economy. They are generally the last
| people to adopt any innovation outside medicine, so
| increasing their share of spending draws dollars away
| from new innovation and towards constructing bingo halls.
| That has a caustic effect on our long-term economic
| outlook.
|
| There will of course be the poor grandmother whom we
| don't want eating dog food. I doubt anyone disagrees with
| you on that. Let's just not pretend all of them need the
| checks they presently receive.
| oyashirochama wrote:
| Social security, specifically is a mostly or was mostly a
| way to force retirement preparation on the masses who
| decided they didn't want or know how to before this. Most
| wealth is now held by middle aged people in the US
| actually, housing issues isn't even caused by old people
| but by multinational banking/holding corporations like
| BlackRock and its like.
| gperkins978 wrote:
| What are you doing to change this? Are you trying to make
| the situation better? California has been run into the
| ground for the last thirty years intentionally. Many
| residents love having mentally ill people die in the
| streets. They have created an entire system to support
| this. Money has been drained away from roads and schools
| to pay for ever growing "programs" to employ rich white
| ladies so they can brag to their friends about their
| incredible virtue.
|
| You are free to leave. There are plenty of low-tax
| countries. If you want to live in the US, Europe,
| Japan,..., then you must pay to be part of our reindeer
| games.
|
| That said, PLEASE get involved and try to direct public
| funding and attention towards core activities (roads,
| schools, infrastructure) instead of ever more ridiculous
| programs to employ Berkeley graduates in virtuous-looking
| jobs. Utah does a great job at this sort of thing.
| Instead of learning from them, our political elite
| degrade them and insult them for their religious beliefs.
| I once repeated a colleague's obscene jokes, only I
| stated that he said them about Muslims instead of
| Mormons. He lost his mind trying to correct me. It was
| amusing.
| ghodith wrote:
| Both arguments are bad, in that they are both based on the
| best use of money that isn't yours to use.
|
| Saying "this person's money most benefits me if I let them
| keep it" vs "this person's money most benefits me if it's
| redistributed to me" are just two frames that reveal your
| belief in your entitlement to others property and labor
| based on your belief of it's benefit to you.
| opo wrote:
| >This is something people love to rage about ...
|
| Yes, people get angry about this, but no one has provided any
| statistics showing this is actually a common loophole.
|
| The basic idea in the reddit post is that there were lenders
| giving multi-decade loans at a tiny interest rate (only
| payable upon death with also sharing a % share of the gains).
|
| Maybe there are lenders who have lots of capital and also
| don't understand the time value of money, but no one has
| actually provided the names of these lenders, etc.
|
| According to this: https://finance.yahoo.com/news/jeff-bezos-
| sell-5-billion-185.... Bezos has sold around $13.4 billion in
| stock in 2024. If he could easily avoid millions (maybe
| billions) of dollars of capital gains tax by this one simple
| trick, why didn't he?
| _bin_ wrote:
| I'm very much on your side of the argument but it's common
| practice. It's not like you can walk into a bank tomorrow
| and ask for that sort of thing, but for a HNW customer who
| makes use of lots of private banking services it's routine.
|
| I'm not Bezos or part of his family office so I can't say
| for sure. My guess would be a mixture of capital demands
| elsewhere (Blue Origin?) and a desire to diversify. Start-
| up founders necessarily keep all their eggs in one basket;
| people building a multi-generational fortune don't.
| Rebelgecko wrote:
| Is it still that common? I'm not super duper high net
| worth so maybe I'm missing out on the good deals, but my
| bank offers these loans interest of SOFR+2-4% depending
| on your net worth. When the SOFR rate is <1% like during
| COVID, it's a pretty good deal. When the SOFR rate is
| more like 5% (which I think is more typical?), it's not
| such a good deal.
| opo wrote:
| >When the SOFR rate is <1% like during COVID, it's a
| pretty good deal.
|
| It is very common to make loans based on using stocks,
| etc. as collateral. But that isn't what people claim
| happens with the "buy, borrow, die" loophole. The claim
| is that these loans have incredibly low interest rates
| (much lower somehow than the IRS Applicable Federal Rate)
| and the interest is only payable upon death - which might
| be decades away. That is how the borrower can supposedly
| avoid capital gains taxes.
|
| Maybe there are rich lenders who don't understand the
| time value of money, but doing a quick search, I have not
| found one stat on how many lifetime loans like this are
| actually being done.
| toast0 wrote:
| I don't know that I've seen a lot of details, but I
| didn't realize the rates were supposed to be less than
| benchmark rates. Either way, the expectation is that the
| appreciation of the capital exceeds the interest. (Not
| that anyone should rely on that expectation, but clearly,
| people do)
|
| And that the lender is offering the loan to capture an
| ultra high net worth investor; so even if you lose money
| on the interest, you gain on advisory services and fees;
| plus first bite at holding the accounts of the heirs.
| Requiring good collateral and high account minimums make
| the risk for the lender low --- if broad market value
| drops significantly, the account should still have more
| collateral to pledge to get back to 1:1. Also, if market
| value drops significantly, selling shares becomes easier
| for the investor, as there may be some shares with
| capital losses, and paying down the loan becomes more
| attractive.
| ryandrake wrote:
| > I don't know that I've seen a lot of details, but I
| didn't realize the rates were supposed to be less than
| benchmark rates.
|
| I know someone who got a mortgage rate way, WAY below
| prevailing rates (like around 1%, gotten back when
| normies like us got rates around ~3%), because 1. he is a
| very high net worth individual and 2. he owns a business
| that does a lot of business with the bank. So, he gets
| extra special treatment because he's rich and the bank
| appreciates his business and expects the relationship to
| lead to even more business.
|
| It's not a huge stretch to imagine that Jeff Bezos's bank
| would happily loan him money at some token 0.01% interest
| rate or some similar sweet deal.
| monocasa wrote:
| It's not under AFR, it's just generally less than
| inflation.
|
| And the loan terms aren't payable at death on any of the
| loans, they just let you refi every year when you want
| another $100M for that year's incidentals.
| monocasa wrote:
| The banks don't like to dump multiple billions at once into
| these schemes. It's more about trickling hundreds of
| millions a year out to cover all possible living expenses,
| and a lot of that going into assets like houses and ships
| that can get repoed if shit hits the fan.
|
| He wanted $13B liquid to start Blue Origin, a pretty
| speculative venture that might end up with nothing. And
| wanted to still outright own Blue Origin unlike Musk's
| Twitter buy that was highly leveraged by the Saudis.
| grantwu wrote:
| > In exchange for such favorable terms (i.e., small
| carrying cost, matures on death), the bank will receive a
| share of the collateral's appreciation (essentially
| amounting to "stock appreciation rights"), and this
| obligation will be settled upon the borrower's death.
|
| It's a loan in name only.
|
| Regarding Bezos's selling of stocks - perhaps he has
| offsetting capital gains. See https://old.reddit.com/r/BuyB
| orrowDieExplained/comments/1f26...
| dietr1ch wrote:
| > These all suck, and the government generally collects money
| on assets as they move not assets at rest.
|
| But staying at rest has been used as a way to sidestep taxes
| for so long.
|
| I'd rather have all investments be taxed every K years as
| they were sold and bought back. Ideally with selling dates
| spread throughout the K days to avoid huge spikes.
| Salgat wrote:
| I don't get why people say a tax on unrealized gains is not
| feasible. All it means is that a percent of your investment
| becomes "realized" every year and you sell a portion of your
| investment to cover it. So if you have a billion dollars in
| stocks and you have to realize 10% of it in a year, you sell
| enough stock to cover the $20 million and the other $80
| million becomes realized and never taxed again (only future
| gains on it). In the end you're only taxed $20M in capital
| gains every year on a billion dollar investment and after 10
| years of this your remaining $800M is not taxed any further.
|
| EDIT: Since it's not obvious, this would apply to the very
| rich, not to someone running a family farm. There would be a
| threshold and exemptions, which is how most taxes work.
| doe_eyes wrote:
| > All it means is that a percent of your investment becomes
| "realized" every year and you sell a portion of your
| investment to cover it.
|
| Because there is a _ton_ of investments that aren 't
| liquid, aren't trivial to value on an ongoing basis, and
| aren't infinitely divisible.
|
| Again, a farm is a perfect example. Land prices are going
| up. Your family farm was worth n million, and is now
| theoretically worth twice that. Do you sell a portion of it
| to developers to pay the tax on the unrealized gains? Oh by
| the way, the land is probably zoned agricultural, so _you
| actually can 't_.
|
| Or, you buy a famous painting as an investment. Do you cut
| off a piece each year and auction it off?
|
| Yeah, it's relatively easy for stock market holdings. But
| if stocks get unfavorable tax treatment, all this will
| accomplish is moving money away from the stock market
| toward assets that get a better treatment... like
| investment real estate, with all the problems that entails.
| martijnarts wrote:
| If you buy a famous painting as an investment, I'd assume
| you have enough money to cover the taxes without having
| to auction it.
|
| Accurately valuing the painting every year is definitely
| very difficult.
|
| The same argument doesn't necessarily go for a farmer's
| farmland. The zoning could of course be calculated into
| the land value. But I'm unsure if farming economics allow
| for paying the taxes on those unrealized gains
| Salgat wrote:
| Just to be clear, we're talking about a wealth tax above
| a certain threshold, think hundreds of millions of
| dollars to billions and billions. This has no application
| to anything remotely related to the "family farm". And
| yes, it is okay to force someone with a half a billion
| dollars in assets to sell off a small percentage for tax
| reasons, unless you think they should never ever be taxed
| for it.
| doe_eyes wrote:
| I'm addressing the parent's proposal, which is to "why
| not just keep selling fractions of the asset to cover
| taxes".
|
| Yes, if you're rich, you might have other ways to cover
| the liability, but that's not what the parent said.
|
| And for what it's worth, these "billionaire" thresholds
| in political discourse are fairly meaningless. The last
| time the Biden admin "cracked down on billionaires", they
| instituted IRS reporting requirements for Paypal and eBay
| when you receive in excess of $600 a year. There just
| isn't enough billionaires for policies that truly target
| only them to make a difference, unless you flat out start
| taxing / confiscating wealth.
| hnaccount_rng wrote:
| But that's largely solved right? The banks that issue
| loans _against_ those assets do put a number on them!
| Just tax it based on this value. And since they are
| willing to lend money anyhow, the user can just take out
| a slightly bigger loan to cover the tax too.
| Voloskaya wrote:
| How would you implement that in startup world for example?
| It's very common for startups to be valued at ~20M$ right
| out of the gate in seed stage, not because the company is
| worth $20M, but because at $20M valuation it allows the VCs
| to invest say $4M and only take 20%, no one want the VCs to
| take more (not even the VCs themselves) because otherwise
| it would mean the founders are left with too little equity
| too soon and probably won't care about their business
| anymore.
|
| Now, as one of the founder, maybe you own ~40% of that
| business, so now your paper net worth is $8M, and just made
| $8M of unrealized gains in that year, how are you going to
| pay that? There is no way you will ever find someone to buy
| $1M of your share at the price of that round, you probably
| wouldn't find anyone willing to buy your entire paper $8M
| for $1M, because again, the company isn't worth $20M yet.
|
| This is true until pretty late in a VC backed company, most
| round aren't priced based on how a realistic buyer would
| value the company, they are priced based on complex
| dynamics. Even a large number of unicorn startups founders
| in the Series C/D stages would have paper wealth of
| potentially 500M range, but absolutely no way to find 50M.
|
| So, you effectively have no way to pay that tax.
|
| This system actually already pseudo-exist in Canada in
| specific conditions: If you stop being a tax resident of
| the country, all your assets are considered realized the
| year you leave and you must pay taxes on them. Which is
| effectively impossible for most startup founders, because
| again, your stock isn't actually liquid. This means you
| can't stop being a tax resident of Canada until your
| companies either dies or you exit somehow. To be clear you
| can't easily just choose to remain tax resident of Canada
| while living abroad, Canada gets to decide, to maximize
| your chance you must prove that you still have ties, so
| e.g. you have to keep a home, you have to keep your bank
| accounts opened there, you must visit often enough etc.
|
| Canada revenue agency offers one alternative: You leave the
| country but leave your stock in their keep, on the day you
| actually realize the gains, they will take what they were
| owed, which sounds great, except if the company fails, or
| you realize gains at a lower valuation, they still consider
| you owe them what was computed the year you left, not the
| day you exit, so there is a real risk of being in debt for
| the rest of your life.
| Salgat wrote:
| You set a minimum threshold to trigger it, and you set
| certain realistic exemptions for things that would
| benefit society, including giving a VC time to mature.
| kemitche wrote:
| Minimum thresholds, and exceptions for less liquid assets
| (private equity) - ideally, again, coupled with
| thresholds.
|
| The same way we have exceptions like CA Prop 13 for
| increasing property taxes.
|
| These problems aren't impossible to solve. It's wild how
| people will find any tiny excuse to give up on making a
| change to try and make tax code more fair. If there are
| edge cases that a blanked change to the code makes worse,
| that's NOT a reason to just throw our hands up and say
| "whelp, can't make changes" - it just means we need to
| add a bit more nuance.
| jandrewrogers wrote:
| The vast majority of assets held by the ultra-wealthy are
| non-liquid. Thinking that these assets are "stock" that you
| can just "sell" is fundamentally misunderstanding the
| nature of the problem. You can't force realization for tax
| purposes because in most cases there is no feasible way to
| realize notional gains. Reality doesn't care if it is
| inconvenient for the government that assets with unrealized
| gains have no realizable value. The problem of asset value
| that is non-realizable is endemic in finance.
|
| Additionally, in the minority of cases where it is
| plausible to force realization, doing so would destroy the
| notional value of the asset in many cases. The government
| will have to issue a tax credit, undoing any tax revenue
| they hoped to gain, but the business is now destroyed so
| there is no future tax revenue either.
|
| Trying to prematurely force realization of asset value is
| either impossible or destructive in the vast majority of
| cases.
| Salgat wrote:
| Oh I'm fully aware of that the ultra wealthy will have to
| sell off some of their assets. Mind you if this exists,
| the market will automatically build this assumption into
| the net worth of an asset. If anything, it will help
| encourage diversification, overall improving the health
| of the economy.
| tsimionescu wrote:
| So what you're saying is that many asset values are
| purely fictional and don't correspond to a real value
| that anyone would pay. But, you think this is a good
| thing and that the government would ruin things if it
| foced asset values to be closer to what someone would
| actually pay for them.
|
| I don't think your argument is as strong as you think it
| is. The value of an asset in a market economy is supposed
| to be what someone would pay for it. If you can't sell
| your Tesla stock for it's value, then it doesn't actually
| have that value.
| Voloskaya wrote:
| > Of course, as your company continues to appreciate, you
| will be forced to continue reducing your ownership stake
|
| Why? In an hypothetical world where getting a loan on an
| asset is impossible (or taxed the same as realizing the
| gains), you still don't get taxed on unrealized gains. You
| can leave your stock alone and you aren't forced to sell
| anything.
|
| Of course if you decide that now that you are worth a billion
| you must live like a billionaire, then yes, you will have to
| sell stock, reduce your influence in the company and pay tax
| on the gains.
|
| I don't see any problem with this? It offers a way for the
| stock owner to choose if they want to use the stock as power
| (don't touch it) or as cash (sell it), only taxing you when
| you opt for the later.
|
| edit: I realised I might have misread your post as defending
| the system allowing one to use unrealized gains to back a
| loan, hence enabling the buy/borrow/die loophole, when you
| are in fact defending against taxing unrealized gains. To me
| the obvious fix is to prevent those loans as discussed above:
| force people to choose how they want to use their assets, if
| they choose to use them to live like kings then they must pay
| tax.
| travisb wrote:
| The fix in your edit isn't an obviously workable fix
| though. When talking about the rich, it's best to talk
| about private corporations -- because that's really how the
| operate.
|
| Firstly, do you want to prevent corporations from taking
| loans against their assets? Preventing that seems like it
| would be quite detrimental.
|
| Secondly, how do you differentiate legitimate corporate
| expenses from personal expenses? Is a billionaire having
| one of their corporations rent a yacht from another of
| their corporations for a business meeting with another CEO
| who just happens to also be their friend a legitimate
| business expense or a personal expense? What if the yacht
| rental company rented it to the CEO's company instead?
| kwanbix wrote:
| Pay a percentage over the difference between the original
| value (50m) and the death value 740M, to inherit, you have to
| pay taxes on the difference, with brackets, as first millon
| 0%, second million 10%, etc.
| mcguirep wrote:
| If one believes it's a big problem, it seems to me there's an
| easy solution that doesn't disrupt anything else. If you use
| a stock as collateral like that, it's a taxable event that
| steps the basis of the stock by the amount of the loan. No
| unnecessary taxation of assets at rest, no double taxation
| later because of the step up in basis, and you close the
| loophole if you view it as such.
| efsavage wrote:
| There is definitely an obvious fix, just have
| collateralization be considered realization. You're welcome
| to have as much money on paper as you want, but if you want
| to post $Xm in stock against a loan, you need to pay taxes on
| it first.
| hluska wrote:
| What happens if the value of the underlying asset
| depreciates?
|
| Here's a hypothetical:
|
| - I own $100 of stock in Company A.
|
| - The First International Bank of efsavage decides to
| accept that $100 in stock as collateral on a loan. So I pay
| taxes assuming a value of $100.
|
| - When I dispose of the stock, it is only worth $80.
|
| Will that be a retroactive credit, meaning that I will have
| to amend my tax return in the year that I collateralized
| those assets? Would it be a forward tax credit, meaning
| that I could apply that credit to future years?
|
| I worry about this both from a bookkeeping point of view
| (since this is potentially a lot of credits) but also worry
| the ways it could be manipulated.
| a_c_s wrote:
| Why would you earn a credit?
|
| You created a tax event and paid taxes on it and you got
| a loan for x% of $100.
|
| If you sell the stock at $80 you'd pay no taxes on the
| appreciation (-$20). No credits, investing is risky.
| hnaccount_rng wrote:
| Why not just treat it as any other loss for tax reasons?
| If I understand this correctly, then the current state is
| basically: If you take losses you can use those to
| nullify a future gain. Just do that.
|
| And.. the bookkeeping thing is really solvable. That's
| kind of what banks are for
| lotsofpulp wrote:
| Really easy, power law formula marginal sales tax rate. The
| more and more you spend, the higher and higher your sales tax
| rate is. Considering most spending happens via electronic
| payments, this should be easily trackable since we have
| internet/electronic databases/identifying numbers for each
| purchaser.
|
| You get a 1099 or W-2 for income, why can there not be an
| equivalent for spending?
|
| This plus power law formula land value tax rates would fix
| multitude of societal problems. Land values are also already
| in electronic databases.
|
| And get rid of income taxes altogether. This would
| disincentivize hoarding and wasting, and incentivize working
| and being efficient.
|
| The only other aspect of rent seeking I can think of that
| would need to be nerfed is copyright terms being reduced to
| 10 years.
| doctorpangloss wrote:
| > The counterpoint is that this leaves money invested, which
| means others invest in other thing.s.. This means less money
| for R&D, for expansion, for your employees...
|
| When grandma's Fidelity manager takes 2% every year to buy
| overpriced mutual funds that themselves eventually just buy
| SPY, how many dollars do you think goes to capital raises of
| any kind? The top of the S&P, which essentially determine its
| returns, are doing stock buybacks with their cash.
|
| You would have been more persuasive if you had said, "Taking
| cash out of the stock market and into real assets results in
| inflation, which is bad for everyone, because nobody needs
| Apple stock to live, but they would like houses."
| Adverblessly wrote:
| > These all suck, and the government generally collects money
| on assets as they move not assets at rest.
|
| The government can also collect money on assets at rest (or
| at least, on cash at rest). They do so by creating money. It
| could be an interesting tax regime where the only forms of
| taxation are taxes to discourage action (e.g. tax on tobacco)
| and money creation.
| a_c_s wrote:
| Getting a loan against assets is another way of "using" it,
| so why not make that a taxable event?
|
| Just like now your stock value would not be taxed while it is
| invested. But now it would be taxed if you use it as
| collateral for anything. If you don't want to pay capital
| gains by selling the underlying stock then you can just get a
| bigger loan and pay the taxes out of that.
|
| There, now you don't have to liquidate but the taxpayers
| benefit too when the wealth is "used" by the owner.
| lesam wrote:
| This still leaves open 'buy, don't borrow, die' as a way
| for the dynastically wealthy to opt out of paying capital
| gains tax.
|
| I think the sensible option is making death a taxable
| event, rather than borrowing (with perhaps exceptions for
| the family farm, but not for the family billion dollar
| business).
|
| And the second best solution is eliminating the step-up
| basis, which without deemed disposition at death is just a
| free gift of capital gains tax rebates to heirs of the most
| wealthy.
| eli wrote:
| Or another way to think of it: your estate has to settle
| all outstanding tax bills after your death, including the
| gains in assets that have remained untaxes your whole
| life.
| nemothekid wrote:
| Only issue I can forsee is that every loan, except a credit
| card, personal loan, and student loan, is typically loaned
| against an asset. I guess you could make carve outs for
| mortgages and auto loans.
| kemitche wrote:
| Why would there need to be a carve out for home/auto
| loans?
|
| 1. No one really borrows against the value of their (paid
| off) car. 2. Property taxes already, generally, are
| against the assessed value of the home, so it's already
| happening for that case. There are some minimal
| exceptions, like CA Prop 13, of course, but generally
| speaking, if I want to take out a second mortgage or
| something, my home's value is already appropriately
| "stepped up."
| eli wrote:
| These are just generic anti-tax arguments. Yes, if you pay
| your taxes you will have less money. And maybe you would have
| used some of that money to do good things. Oh well.
|
| I don't think anyone is seriously suggesting you shouldn't be
| allowed to borrow against assets. That isn't even the
| problem. The problem is that you can go your whole life
| without paying taxes on gains of those assets, then pass them
| on to your heirs who can sell them and also never have to pay
| those taxes. It's like a big gift from the IRS: your assets
| that were previously encumbered by unpaid capital gains taxes
| instantly become more valuable upon your death.
|
| Your heirs should have the same cost basis as you did. And so
| if they sell they have pay the taxes that you never did.
| Negitivefrags wrote:
| The main concern with this is how do you actually get the
| records of what the cost basis was from someone who is
| dead?
| saghm wrote:
| If the issue is that people are dying leaving behind
| significant wealth but not documenting this, just make
| the estate tax 100% on any assets missing documentation
| like this. I'm sure the lawyers would figure out the
| rest.
| eli wrote:
| That's effectively already the rule if you sell something
| and can't figure out the cost basis - it counts as zero.
| AnthonyMouse wrote:
| That isn't really the main concern. It's really a
| question of alienability.
|
| If your great grandfather invested in something a hundred
| years ago and now 99% of its value is appreciation (or
| inflation), you may or may not want to continue investing
| in it. If you do, the step up in basis doesn't really
| matter because you're not going to sell it anyway.
|
| But if you now think it's a mediocre investment, you may
| be inclined to sell it and invest in something else.
| Except that you won't if you'd lose a significant
| proportion of its value to taxes. This is a problem with
| capital gains taxes in general, but it's especially a
| problem for anything held intergenerationally (i.e. for a
| very long time) because not only will the appreciation be
| large, the _inflation_ by itself would represent most of
| the value of the "gain". So the step-up in basis is a
| stupid hack to avoid this and let children make different
| choices than their parents and grandparents without being
| punished by the tax code.
|
| There are probably better ways to handle this, but
| "delete it and replace it with nothing" is not one of
| them.
| CPLX wrote:
| > There are probably better ways to handle this, but
| "delete it and replace it with nothing" is not one of
| them.
|
| Why not? Why do I care about someone being deprived of a
| portion of some investment his great-grandfather made?
|
| If I get money from some relative who invested in stuff
| and then you get money from working really hard in a way
| that someone thought valuable so they gave you money for
| your work, why should you pay taxes on that money while I
| don't pay taxes on the money I got from my dead relative?
|
| Are we trying to incentivize people to be born to
| families that already have money or something? Like are
| we afraid that if we don't do this, we'll be creating
| incentives for people to get born into poor families
| instead?
| AnthonyMouse wrote:
| > Why do I care about someone being deprived of a portion
| of some investment his great-grandfather made?
|
| Because they only get deprived of it if they sell it, so
| that gives them more incentive not to sell it, but
| selling it may be more economically productive, and then
| you lose the positive externalities of the more
| productive investment _and_ the tax revenue it would have
| generated, which could by itself plausibly be more than
| the loss from the step up in basis.
|
| In general the problem is that capital gains taxes when
| implemented simplistically create a lot of perverse
| incentives (tax on productive investment is economically
| undesirable in general and some of the edge cases are
| especially ugly), and then the tax code gets full of
| warts that try to reduce the bad incentives/consequences
| instead of rethinking the structure of the tax.
|
| > If I get money from some relative who invested in stuff
| and then you get money from working really hard in a way
| that someone thought valuable so they gave you money for
| your work, why should you pay taxes on that money while I
| don't pay taxes on the money I got from my dead relative?
|
| Your dead relative already paid the taxes on any money
| earned in the equivalent way. Capital gains are on asset
| appreciation, which is an industrial-sized can of worms.
| ac29 wrote:
| Brokers have been required to track costs basis
| information since 2011. That doesnt really help for
| assets purchased before then, so estate executors would
| need to find records for transactions before then. The
| IRS will generally assume a costs basis of zero until
| proven otherwise.
| Fin_Code wrote:
| Yep step up in basis reform. Thats actually on the table
| under Kamala.
| dixie_land wrote:
| Why would capital gains be taxed in the first place? It's
| simply double taxation on the income
| jewayne wrote:
| I always ask myself, "What was a government service
| necessary in order to obtain this money?" Since there are
| no capital gains without all manners of law enforcement,
| the answer is yes here. A capital gain is not a tax on
| the original income. It's a tax on the capital gain,
| which would be impossible without the rest of us.
| AnthonyMouse wrote:
| > Yes, if you pay your taxes you will have less money.
|
| The issue is that it can cause you to have less than _zero_
| money, and be forced to sell (possibly illiquid) assets
| solely in order pay the tax. This is kind of a major deal,
| e.g. you have an asset worth $20M, but not if you have to
| sell it _right now_ because it would take time to find the
| right buyer, so instead you 're forced to sell it for $8M
| to the only person who will buy it immediately. Some assets
| may not even be _possible_ to sell in the current year,
| e.g. because the law requires the owner to have some
| specific license but the only other current licensees are
| rightfully prohibited from buying you out by antitrust
| laws. Not to say that the resulting market consolidation
| would be a good thing when that isn 't the case.
|
| > Your heirs should have the same cost basis as you did.
| And so if they sell they have pay the taxes that you never
| did.
|
| What this is really encouraging is that they never sell.
| Which isn't even obviously going to increase tax revenue.
| If the daughter inherits the business and runs it
| successfully for a few years and then sells it for 25% over
| its value at transfer, the government gets tax on the 25%,
| and then going forward gets the taxes from the new, more
| productive investment she sold that one in order to buy.
| And the latter isn't just capital gains; better investments
| would also be employing more people (payroll taxes, fewer
| unemployment claims), paying more property taxes, etc.
|
| If you make it so the tax basis stays low so a sale would
| have to pay tax on 95% of the value instead of 25%, she
| doesn't sell, you don't even get the tax on the 25% and the
| tax base stays lower because she doesn't switch to the more
| productive investment.
| keybored wrote:
| > This is something people love to rage about, yet it's not
| one with an obvious fix.
|
| Rage about. Off to a good start. I wonder what the conclusion
| will be?
|
| > [look at all of these reasonable-looking arguments for the
| existing tax laws]
|
| Sure. Most people are fine with rich people not getting taxed
| into the middle class or having to work for a living.
|
| What does this prove about anything?
|
| > These all suck, and the government generally collects money
| on assets as they move not assets at rest. I see no way to
| resolve it that isn't suckier than the status quo and so am
| left with the conclusion that people who agitate for such
| changes are more resentful of the rich than they are worried
| about the justice or lack thereof of tax avoidance.
|
| Hmm. I knew there was something off about attributing "rage"
| straight off the bat.
|
| I don't know how you disentangle "justice" from "resentment"
| so easily. Resentment IS EXACTLY injustice over a
| sufficiently long enough time.
|
| But I tend to see this idea that people who are upset about
| something real need to have... pure emotions. They must be
| upset because someone else (the poor maybe) are getting
| shafted. They certainly can't be resentful (jealous) or
| something selfish like that.
|
| (I don't know what dimension you live in in the real world,
| confronted with these kinds of people, where this would be a
| compelling argument to anyone. Seems like a Let Them Eat Cake
| position.)
|
| So people who are rightfully upset--you don't even argue
| against that part--get dismissed because they have allowed
| impurity into their hearts. While the rich get to do their
| tax schemes. _But_ , he shrugs his shoulder, _better that the
| rich fleece the government than that the commoners have
| impure thoughts_.
| briffle wrote:
| There are literal mansions on dozens of acres (with
| landscaping, ponds, etc) 3 miles from me that have a lower
| property tax than my 2000sq foot suburban home. They were
| purchased by a trust in the 80s or early 90's, and now the
| kids (or grandkids) live in it. My state limits how much
| property tax can be raised on a home until its sold, and then
| that number resets.
|
| It drives me a bit crazy..
| eadmund wrote:
| > This is something people love to rage about, yet it's not
| one with an obvious fix.
|
| Removing the step-up in basis seems like an obvious fix.
| Record the basis at the time of transfer, then charge taxes
| when or if it is sold. Adjust for inflation if that seems
| reasonable.
|
| Is there anything wrong with this? It doesn't require selling
| on receipt.
| mindslight wrote:
| There is a quite simple fix that already applies to the IRAs
| that most people use as their main tax deferral - if you take
| a loan using your IRA as collateral, that loan is considered
| a distribution from the IRA, and is thus taxed. Requiring
| capital gains to be realized when an asset is used as
| collateral wouldn't be nearly as problematic as you're making
| out. For example, if someone's company appreciates to $50M
| and they then wish to turn some of that abstract value into
| concrete cash, then yes it's time to pay some taxes. Those
| taxes can simply be paid with some of the money from the loan
| too, you know.
| _DeadFred_ wrote:
| If someone leases a car instead of buying it in many states
| they still have to pay sales tax, just on each lease payment.
| Somehow we can figure out how to charge sales tax on non-
| sales sales when it impacts the average joe, but not income
| tax on non-income income when it impact business owners
| because 'think of the business'. I don't see how taxes when
| someone extracts value from their company is any different or
| more difficult than taxing Joe average 'sales tax' on a lease
| payment.
|
| The business is irrelevant. We are talking about the tax on
| the person who is getting income because our government
| functions from taxes on income. Just like how we charge sales
| tax on a non-sale when state government functions on taxes on
| sales. Tax business owners when they extract value from their
| business.
| jandrewrogers wrote:
| A caveat is that this strategy requires owning assets with a
| lot of liquidity. One of the points raised during the whole
| "taxing unrealized gains" episode is that the vast majority of
| assets (~70%) held by the ultra-wealthy effectively have very
| little liquidity. As a consequence, they can't really be used
| as cheap collateral for secured debt.
| HeyTomesei wrote:
| I began my career doing this (Deloitte Tax's Private Client
| Group).
|
| Yes, it is truly fascinating.
| skizm wrote:
| I was under the impression that the estate has to pay the debts
| before the assets are disbursed, and the step-up basis occurs,
| thus collecting all appropriate taxes, just deferred until
| after death. This reddit post says the opposite is true. I
| cannot find the answer via Google. Does anyone know the order
| of operations?
|
| If the step-up basis occurs first, the fix here seems very
| obvious, but I assume ultra-wealth people have lobbied to keep
| that from changing?
| mindslight wrote:
| The asset value minus the debt (both on the date of death
| [0]) is what contributes to estate tax liability on the 706
| form [1]. Then going forward, the asset basis is stepped up
| to what it was on the date of death (for both the estate
| entity and downstream beneficiaries), based on the idea the
| asset has already been taxed by the estate tax. This
| assumption falls apart when there isn't much value left in
| the asset-minus-loan that counts for estate tax, because most
| of the value had already been realized and spent during the
| decedent's lifetime.
|
| [0] ignoring the "alternative valuation" option
|
| [1] at least per my "decoupled" year 1999 understanding. And
| no, that doesn't mean my experience is from 1999.
| skizm wrote:
| So if I take a company public, and now own $10B in shares
| in a liquid stock (that I paid $0 for), take out a $1B
| loan, spend it all, and then die. What taxes need to be
| paid by the estate in that scenario?
| mindslight wrote:
| First, a disclaimer that shouldn't even need to be said,
| but the legal regime being what it is - I'm not an
| accountant nor an attorney, but rather an just engineer
| that digs into the specific details of things rather than
| paying professionals to screw it up for me. So there is
| no warranty or representation for anything I'm saying,
| and it's merely meant as starting pointers for your own
| independent analysis. Being a Random Internet Commenter,
| perhaps I'm even purposely giving out bad advice because
| I want people to end up paying more taxes to the
| government.
|
| You're not really capturing the full scope of when taxes
| might need to be paid. In your scenario, the Estate Tax
| would be calculated on $9B. The executor/per.rep of your
| estate would then have $10B shares with a $1B loan
| against them. The basis of the shares would be their
| current value, so if they (or your heir(s)) sold $1B
| shares to pay off the loan there would be no capital
| gains tax. There would also be no capital gains tax if
| they sold the other $9B shares (but Estate Tax was paid
| on them instead). Of course, they might have to sell some
| of the $9B shares to pay the estate tax bill.
|
| Where things get really interesting is the charitable
| contribution deduction. If you sell $1B in shares and
| donate $9B to a nonprofit (likely set up and controlled
| by you, and subsequently your heirs), then you get a $9B
| deduction on your taxes (wiping out the capital gains on
| the $1B). Then no estate tax, since they're not yours
| when you die. From what I understand it's also a great
| asset protection strategy against random creditors.
|
| When we're talking billions and minimizing estate tax,
| the latter dodge is more applicable since it's going to
| awfully hard to actually spend down billions. The loan
| plus stepped up basis dynamic is more about dodging
| capital gains taxes while actually realizing and spending
| the gains while you're alive.
| ThePowerOfFuet wrote:
| Is it just me, or is it really wild seeing the hypothetical
| person being referred to in the Reddit post as a "taxpayer"?
| ksec wrote:
| This may be off-topic.
|
| >Billionaires are like black holes. We deduce their existence
| from the fundamental laws of capitalism, see their gravity pull
| politics into their orbit, even detect signals of their existence
| in the public markets.
|
| I dont know about others. This is very beautifully put. But I am
| wondering if anyone has an counter argument. Because this
| basically means money > power;
|
| > "As gravity pulls politics into their orbit."
|
| It may be true in US or other democratic nations. It certainly
| isn't true in Russia or China. If what was described was
| _fundamental laws of capitalism_ , Could we argue those nations
| where power is greater than money are not capitalism?
|
| If so, what is the opposing force against the laws of capitalism?
| And are there anything in physics such as opposing force of the
| laws of gravity? Without going into Space Time?
| ryandvm wrote:
| The more money you allow into politics, the more politics
| becomes about money.
| ksec wrote:
| Thank You !
| whatshisface wrote:
| The pull of oligarchs is more real in Russia than anywhere else
| in the world.
| cheema33 wrote:
| > The pull of oligarchs is more real in Russia than anywhere
| else in the world.
|
| It may have been true at some point. But, Putin put an end to
| it. He killed oligarchs when they fell out of line. There are
| some ex-oligarchs living outside of Russia, no longer super
| rich, after Putin took away their wealth.
| TacticalCoder wrote:
| > But I am wondering if anyone has an counter argument.
|
| Confiscating all the US billionaires' wealth wouldn't even
| lower the US's debt by 20%.
|
| France's public spending is 60% of the GDP, the situation in
| France is totally catastrophic (6% deficit atm) and... We
| should listen to Piketty because he's only ever worked public
| jobs and... He's french? And came up with an ultra-simplistic
| formula using bogus data?
|
| I mean... If Piketty says it, obviously government spending
| representing 60% of the GDP ain't enough. Let's make it 100%
| and called it a planned economy. Because we saw a lot of fully
| functioning communist societies on earth?
|
| Ponder this.
| cycomanic wrote:
| what a weird argument. > Confiscating all the US
| billionaires' wealth wouldn't even lower the US's debt by
| 20%.
|
| so in other word confiscating the wealth of < 1000 people
| would reduce the US (a nation of ~300 M people) debt by
| nearly 20%. In other words we could significantly reduce the
| budget (much less interest payments) by taking away the
| wealth of ~0.0003% of the population. That seems like a no-
| brainer in terms of policies (the government makes decisions
| that takes peoples wealth away every day).
| olalonde wrote:
| And guess who's going to renounce to US citizenship and/or
| start companies outside the US after that? Are
| entrepreneurs still going to immigrate to the US knowing
| that their wealth will be confiscated once they become
| successful? Who is going to fund the startups? etc.
|
| If the US were to implement such measures, get ready for an
| exodus of talent and capital.
| hollerith wrote:
| Yes, and after we confiscate their assets, we turn them
| into delicious meat pies. Surely this is not unethical
| because each billionaire, turned into meat pies, will feed
| many dozens of us.
| adamisom wrote:
| a "no-brainer"? for a _one-time_ reduction? that severely
| damages America 's ability to generate wealth? am I taking
| crazy pills today? I advise you to compare America's GDP
| per capita and especially disposable income per capita to
| any other country. wealth generation matters so much more
| than distribution.
| triceratops wrote:
| > that severely damages America's ability to generate
| wealth?
|
| Why would it damage that ability? The assets those
| billionaires own aren't going away. The skills of the
| people working at those businesses aren't going away.
| fallingknife wrote:
| There is no counter argument because you haven't even made an
| argument to counter. It's just the same tired old "government
| is in the pocket of billionaires" canard that people who don't
| know how anything actually works throw out without ever
| actually providing any evidence of it.
| BobAliceInATree wrote:
| I've always thought based on the number of $10+MM condos in NYC
| that sit unoccupied (i.e. 2nd or 3rd or more homes), that there
| must be an order of magnitude more billionaires out there than we
| know about, and this certainly gives credence to that.
| Beijinger wrote:
| State of the Union
|
| https://i.ibb.co/ZXF6S9C/usa.jpg
| _bin_ wrote:
| The reference to Piketty with its implication that Sarofim
| represents some hidden class of billionaires is particularly
| annoying. He was prolific in Houston's social business scene for
| decades and married the Brown heiress, who was similarly known
| (along with her father). He threw some of the best Christmas
| parties and wasn't exactly a recluse, so I see relatively little
| reason to connect him to that idea. His son Christopher is very
| similar. He was worth upwards of the author's estimate but a
| generally good guy who doesn't really deserve the "evil
| billionaire" label which the author quietly assigns.
| 1024core wrote:
| > Last year, observers with the economic equivalent of a radio
| telescope detected a radiating anomaly on the February 28, 2023,
| daily balance sheet of the US Treasury Department: a $7 billion
| estate- and gift-tax payment.
|
| Where can one find this daily balance sheet?
| ak217 wrote:
| https://fiscaldata.treasury.gov/datasets/daily-treasury-stat...
| FactKnower69 wrote:
| >people with an estate that is taxable -- worth more than $13.6
| million, or $27.2 million for a married couple
|
| the regulatory capture on display in the USA is absolutely
| pathetic hahaha
| kouru225 wrote:
| If the US was really capitalist it would publish the wealth
| leaderboards for everyone to see
| bluGill wrote:
| You can't really do that because there is no way to know how
| much someone is worth. What is my house worth - there is no
| answer until I sell it. You know what it last sold for, but you
| have no idea if I fixed it up since then so it is worth more;
| or maybe I was cooking meth and now it is a toxic waste site
| with negative value. A house is simple to value compared to a
| business. A yacht is another asset that is really hard to
| value.
|
| For public stocks we can at least calculate value with
| computers, but for some that is a minority of value. In 1960
| the DOW was used because it is only 30 stocks so you can add
| the values up every few minutes - the S&P 500 could only be
| calculated at the end of the day as by the time you got the
| value of the last stock the value of the first had changed.
| jmpman wrote:
| This is the most frustrating news I've read about taxes. As an
| American, I'd like to think that our tax system was designed to
| be fair. Yes, Warren Buffet's secretary famously paid a higher
| tax percentage than he did, because all of his wealth was in
| unrealized gains. I'd accepted that - with the understanding that
| upon Warren's death, estate taxes would be paid, and "fairness"
| would be restored to the system. But, lobbying for tax loopholes,
| wealth left to charities where heirs are awarded outrageous
| management fees, etc are ways for the extremely wealthy to avoid
| ever paying these estate taxes. When I heard the democrats push
| for a billionaire tax, I was quite cynical, as I thought the
| fairness issue would be resolved through estate taxes. This $7B
| being an anomaly, suggests that the wealthy are engineering their
| way around paying these estate taxes. I thought those problems
| were limited to "step-up" in cost basis type of giveaways to the
| wealthy. Now I'm reading that even the basic estate taxes aren't
| being paid. I'm livid. Hate to say this, but I may now support
| the democrats plan. It's a horrible plan, but apparently estate
| taxes aren't working either.
| HeyLaughingBoy wrote:
| > I'd like to think that our tax system was designed to be fair
|
| It is. But everyone has a different definition of "fair."
| taylorius wrote:
| So it was a death-duty style tax - that makes more sense. For a
| minute I was imagining a lawyer reading a will. "And lastly, I
| leave my entire 7 billion dollar fortune to... the U.S.
| Government."
| jldugger wrote:
| Well, the article leaves open the possibility that it was Musk
| paying the gift tax now to avoid paying an even larger estate
| tax later.
| danm wrote:
| Maybe a consumption tax with broad exemptions for necessary goods
| like food, clothing, shelter, etc would be a nice way of dealing
| with the issues people seem to have with others having wealth.
|
| Billionaire heirs use the inheritance to buy a yacht, big tax
| bill, mostly use the inheritance to continue funding things that
| are generally good for society, smaller tax bill.
| morpheuskafka wrote:
| I don't care if a rich person buys a yacht or not, it's their
| money and after they've paid the tax they can do whatever they
| want. The wealthier you are you should pay more tax regardless
| of how you use the money. Consumption taxes just make it harder
| for regular people to afford things they want; the wealthy
| won't care that a luxury bag with 1000% profit margin has an
| extra 10% tax on top.
|
| There's already exemptions for both income and estate tax for
| donations to charities or governments to benefit society. It's
| possible to set up a private foundation, with some additional
| guardrails to prevent abuse, if you want to give the money
| directly to people that need it.
| HeyLaughingBoy wrote:
| Maybe those people should just get over themselves?
| hardtke wrote:
| Estate tax valuations of assets should be made public,
| particularly the taxed value of professional sports franchises.
| We know that NFL teams are worth $6+ billion dollars, and seeing
| the billionaire owner families pay tax on 1/10th of that might
| infuriate voters enough to demand reform.
| CatWChainsaw wrote:
| Read Moneyland, get mad.
| jonny_eh wrote:
| Can someone fix this grammar?
|
| > The data wasn't erroneous, Treasury officials found, who are
| legally forbidden to discuss tax filings.
| deepsun wrote:
| One thing not discussed: Accumulated Earnings Tax. 20%
|
| It forces companies to distribute gains to shareholders, not
| amass it.
|
| It already exists, we just don't enforce it enough.
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