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Taxing capital gains at 39.6% (our current top income bracket as of 2016) would be bad for business, job creation, and growth in the US economy. California also

Taxing capital gains at 39.6% (our current top income bracket as of 2016) would be bad for business, job creation, and growth in the US economy. California also taxes long term capital gains (LTCG) at a top rate of 13%. It would mean that an investor in California would experience a LTCG rate of 52.6%, the highest in the entire OECD. Capital has legs and having a non-competitive capital gains rate would incentivize investors to allocate their capital elsewhere. [1] http://taxfoundation.org/article/2016-tax-brackets http://taxfoundation.org/article/2016-tax-brackets [2] http://www.forbes.com/sites/robertwood/2015/03/25/u-s-capital-gain-rate-among-worlds-highest-but-president-obama-wants-more/#10f23b8f20ce http://www.forbes.com/sites/robertwood/2015/03/25/u-s-capita... [3] http://taxfoundation.org/blog/how-high-are-capital-gains-tax-rates-your-state http://taxfoundation.org/blog/how-high-are-capital-gains-tax...

rtpg 11y ago
This assumes that capital can get the same ROI anywhere in the world, which is not at all true. If the strongest businesses are based in the US, the US can force investors to play by the rules they want. It's just another part of the equation.
- LoSboccacc 11y ago
  Shell companies all over the world disagree. You can have access to the US market and still dodge taxes.
- deleted 11y ago
  [deleted]
downandout 11y ago
>California also taxes long term capital gains (LTCG) at a top rate of 13% I'm sure that Zuckerberg et al have brilliant tax accountants, but this is one thing that has never made sense to me. Volunteering to pay an extra 13% simply for the privilege of living in Northern California seems insane to me. Any of these guys could move a few hours down the road to Tahoe or Reno and save themselves billions of dollars in state taxes, even if they left the company headquarters in CA. I'd also like to see Pricenomics do a study measuring the market cap impact of California's high corporate income tax rates on major publicly traded Silicon Valley companies. I'm guessing investors would be sickened by the results.
- adrianN 11y ago
  Maybe they're rich enough that it doesn't matter to them. Whether you make 10 Million a year or 15 maybe doesn't have an impact on your lifestyle at all.
  - downandout 11y ago
    Yes, but at $15M/yr, the 13% is only $1.95M. That's high, but not singlehandedly-supporting-the-government high. In 2013, Mark Zuckerberg paid an estimated $2.3 billion in total income tax [1]. About 40% - nearly $1 billion - likely went to California state taxes - for the mere privilege of living near the beach. If he wants to give $1 billion in cash away, there are alot better uses than to give it to state government bureaucrats. For example, he could have moved to Nevada, saved the $1 billion, and taken 50,000 homeless people off the streets for a year for that much money (which, by the way is ~10% of the entire homeless population in the United States - imagine the positive social impact of doing such a thing). The point is that federal taxes are inescapable, while state taxes are not. It makes no financial sense for someone with nine or ten figure tax liabilities to be living in high tax states. [1] http://www.forbes.com/sites/robertwood/2013/12/20/mark-zuckerbergs-2-billion-tax-bill/#6dd3ea5ff553 http://www.forbes.com/sites/robertwood/2013/12/20/mark-zucke...
- freddie_mercury 11y ago
  You pay state taxes based on where the income is generated from (for most states but definitely for California), not where your house is. Putting their house in Tahoe/Reno but leaving the HQ in California wouldn't affect their income taxes. They'd have to move the company HQ to Reno/Tahoe to avoid the taxes.
  - downandout 11y ago
    Not true in the case of shareholders. For example, if MZ became a Nevada resident and quit working for Facebook but still had all of his shares, he would not be subject to California taxes when he sold them. Even if he continued working or consulting for FB, California taxes would likely only apply to the income or options derived from that work (though California has some onerous and complex "substantial nexus" rules that may apply if he still worked there, yet another reason to simply not startup there in the first place).
maxerickson 11y ago
Exactly how bad it would be is a lot more interesting than that it would be bad. I mean, I accept that it will have a negative marginal effect, and I accept that people will shift their behavior to avoid the tax, but I don't accept that they will start stuffing their money in the mattress because they only get to keep some of the profits of their investments.

rtpg 11y ago

This assumes that capital can get the same ROI anywhere in the world, which is not at all true. If the strongest businesses are based in the US, the US can force investors to play by the rules they want. It's just another part of the equation.

LoSboccacc 11y ago
Shell companies all over the world disagree. You can have access to the US market and still dodge taxes.
deleted 11y ago
[deleted]

downandout 11y ago

>California also taxes long term capital gains (LTCG) at a top rate of 13% I'm sure that Zuckerberg et al have brilliant tax accountants, but this is one thing that has never made sense to me. Volunteering to pay an extra 13% simply for the privilege of living in Northern California seems insane to me. Any of these guys could move a few hours down the road to Tahoe or Reno and save themselves billions of dollars in state taxes, even if they left the company headquarters in CA. I'd also like to see Pricenomics do a study measuring the market cap impact of California's high corporate income tax rates on major publicly traded Silicon Valley companies. I'm guessing investors would be sickened by the results.

adrianN 11y ago
Maybe they're rich enough that it doesn't matter to them. Whether you make 10 Million a year or 15 maybe doesn't have an impact on your lifestyle at all.
- downandout 11y ago
  Yes, but at $15M/yr, the 13% is only $1.95M. That's high, but not singlehandedly-supporting-the-government high. In 2013, Mark Zuckerberg paid an estimated $2.3 billion in total income tax [1]. About 40% - nearly $1 billion - likely went to California state taxes - for the mere privilege of living near the beach. If he wants to give $1 billion in cash away, there are alot better uses than to give it to state government bureaucrats. For example, he could have moved to Nevada, saved the $1 billion, and taken 50,000 homeless people off the streets for a year for that much money (which, by the way is ~10% of the entire homeless population in the United States - imagine the positive social impact of doing such a thing). The point is that federal taxes are inescapable, while state taxes are not. It makes no financial sense for someone with nine or ten figure tax liabilities to be living in high tax states. [1] http://www.forbes.com/sites/robertwood/2013/12/20/mark-zuckerbergs-2-billion-tax-bill/#6dd3ea5ff553 http://www.forbes.com/sites/robertwood/2013/12/20/mark-zucke...
freddie_mercury 11y ago
You pay state taxes based on where the income is generated from (for most states but definitely for California), not where your house is. Putting their house in Tahoe/Reno but leaving the HQ in California wouldn't affect their income taxes. They'd have to move the company HQ to Reno/Tahoe to avoid the taxes.
- downandout 11y ago
  Not true in the case of shareholders. For example, if MZ became a Nevada resident and quit working for Facebook but still had all of his shares, he would not be subject to California taxes when he sold them. Even if he continued working or consulting for FB, California taxes would likely only apply to the income or options derived from that work (though California has some onerous and complex "substantial nexus" rules that may apply if he still worked there, yet another reason to simply not startup there in the first place).

maxerickson 11y ago

Exactly how bad it would be is a lot more interesting than that it would be bad. I mean, I accept that it will have a negative marginal effect, and I accept that people will shift their behavior to avoid the tax, but I don't accept that they will start stuffing their money in the mattress because they only get to keep some of the profits of their investments.