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> Whatever. The premise still holds fine, we could drastically increase marginal tax rates at the top end and the world wouldn’t blow up. No, the world would n

by darawk 8y ago

> Whatever. The premise still holds fine, we could drastically increase marginal tax rates at the top end and the world wouldn’t blow up. No, the world would not blow up. But you'd generate basically zero revenue. People that make $10 million a year are mostly not making that in the form of cash compensation. And those that are have the leverage to demand different forms of compensation. Which they will immediately do. The person that person that makes that kind of money that also doesn't have the power to say "pay me in equity now, thanks" is extremely rare indeed.

tedsanders 8y ago
Doesn't income tax apply to equity grants too? (Genuine question.)
- darawk 8y ago
  For options, not really: https://www.investopedia.com/articles/active-trading/061615/how-stock-options-are-taxed-reported.asp https://www.investopedia.com/articles/active-trading/061615/... In some cases yes, but often no.
  - tedsanders 8y ago
    I receive non-tradeable options from my employer. My understanding is that the value of the option is taxed as income upon exercise (or sale of stock, for statutory options). There are games to play about which tax year to exercise in, but no getting around the income tax. Can you explain how income tax is avoided with options? The only potential tax avoidance I see is: (1) avoided income tax by flexibility in timing of the exercise/sale (2) potentially avoided capital gains tax if the value of the option grows before exercise/sale In neither case do I see a way to get around income tax on options given as compensation for work.
CPLX 8y ago
> But you'd generate basically zero revenue. Extraordinary claims require extraordinary evidence, which you’re not providing. If you keep all else constant then raising the tax rate will raise revenue. Your narrative about how all else will not be held constant isn’t compelling. Whatever mechanisms you describe for tax avoidance are only marginally different at 35% than 70%, making your hypothesis of zero obvious fiction.
- darawk 8y ago
  Did you read what I said? People in the bracket you're targeting don't get paid in cash. It's not a scheme, it's not theoretical, it's a fact.
  - CPLX 8y ago
    Then by your logic they aren’t paying any tax now either. So raising the rate won’t change anything. If so why not just do it for fun? Either they pay tax now at a certain rate or they don’t. Your premise that raising the rate won’t change the tax bill is based on your theory that whatever they’re paying now is just by their grace and free will?
    - opo 8y ago
      Because it hurts the economy. As I said previously, confiscatory high tax rates just result in politically connected groups getting tax breaks, lots of money spent in less productive ways to avoid the high rates and if those can't be done you get dead weight losses from economic activity that isn't done. There is a reason countries moved away from confiscatory high rates.
      - CPLX 8y ago
        Some countries have some haven't. The top marginal tax rate in Denmark is over 60% I've been there, it's awesome, everything works super great, and the country consistently ranks as the happiest population on the planet. They also have a great economy. Meanwhile I've lived in the US for almost five decades and watched as the billionaire class has lobbied successfully for lower taxes, offshoring, financialization of everything, and criminalization of debt, leading to vast swaths of the country condemned to permanent economic misery, increased xenophobia and political instability, declining standards of healthcare, and an out of control problem of education debt for the next generation.
        opo 8y ago
        A difference is that the US is a much more progressive tax system, - the tax rates in Denmark are much flatter. This gives Denmark much more income from taxes per person. So far none of the politicians in the US arguing for very high rates in the US are arguing that the bulk of the country should pay them.

by darawk 8y ago

tedsanders 8y ago

Doesn't income tax apply to equity grants too? (Genuine question.)

darawk 8y ago
For options, not really: https://www.investopedia.com/articles/active-trading/061615/how-stock-options-are-taxed-reported.asp https://www.investopedia.com/articles/active-trading/061615/... In some cases yes, but often no.
- tedsanders 8y ago
  I receive non-tradeable options from my employer. My understanding is that the value of the option is taxed as income upon exercise (or sale of stock, for statutory options). There are games to play about which tax year to exercise in, but no getting around the income tax. Can you explain how income tax is avoided with options? The only potential tax avoidance I see is: (1) avoided income tax by flexibility in timing of the exercise/sale (2) potentially avoided capital gains tax if the value of the option grows before exercise/sale In neither case do I see a way to get around income tax on options given as compensation for work.

CPLX 8y ago

> But you'd generate basically zero revenue. Extraordinary claims require extraordinary evidence, which you’re not providing. If you keep all else constant then raising the tax rate will raise revenue. Your narrative about how all else will not be held constant isn’t compelling. Whatever mechanisms you describe for tax avoidance are only marginally different at 35% than 70%, making your hypothesis of zero obvious fiction.

darawk 8y ago
Did you read what I said? People in the bracket you're targeting don't get paid in cash. It's not a scheme, it's not theoretical, it's a fact.
- CPLX 8y ago
  Then by your logic they aren’t paying any tax now either. So raising the rate won’t change anything. If so why not just do it for fun? Either they pay tax now at a certain rate or they don’t. Your premise that raising the rate won’t change the tax bill is based on your theory that whatever they’re paying now is just by their grace and free will?
  - opo 8y ago
    Because it hurts the economy. As I said previously, confiscatory high tax rates just result in politically connected groups getting tax breaks, lots of money spent in less productive ways to avoid the high rates and if those can't be done you get dead weight losses from economic activity that isn't done. There is a reason countries moved away from confiscatory high rates.
    - CPLX 8y ago
      Some countries have some haven't. The top marginal tax rate in Denmark is over 60% I've been there, it's awesome, everything works super great, and the country consistently ranks as the happiest population on the planet. They also have a great economy. Meanwhile I've lived in the US for almost five decades and watched as the billionaire class has lobbied successfully for lower taxes, offshoring, financialization of everything, and criminalization of debt, leading to vast swaths of the country condemned to permanent economic misery, increased xenophobia and political instability, declining standards of healthcare, and an out of control problem of education debt for the next generation.
      - opo 8y ago
        A difference is that the US is a much more progressive tax system, - the tax rates in Denmark are much flatter. This gives Denmark much more income from taxes per person. So far none of the politicians in the US arguing for very high rates in the US are arguing that the bulk of the country should pay them.