4 ms·

Here's a scenario of punishing the American dream: Imagine you're a startup founder who has a high-flying startup. You own 20%. It just got valued at $800,000,

by davidu 7y ago

Here's a scenario of punishing the American dream: Imagine you're a startup founder who has a high-flying startup. You own 20%. It just got valued at $800,000,000. Now you're worth $160,000,000 ON PAPER. That's awesome. But it's not the same is being rich. Imagine your salary is $150,000. With the Warren plan you now owe $2,200,000 PER YEAR in taxes from cash you don't actually have. So you now what, sell your company? Try to secondary? Congrats you just got taxed real money on fantasy paper gains that you never realized.

SubuSS 7y ago
Sorry I haven't looked through that site or even understood the plan - can someone summarize how the valuation is done? Will there be money back or credit if the valuation drops the next year? Also IIUC This seems to be a number that need paid (19MM per Billion?) every year - is that right? About a 2% tax.
undersuit 7y ago
Why is it so hard to imagine that in the presence of a wealth tax the company won't be valued at $800,000,000? When the news came out this week the Uber dropped in price it was naturally accepted it was because the lock out for employee stock sales ended.
msteffen 7y ago
At the point where a startup is being valued at 800M (and therefore raising rounds of ~100M?) are the founders still making 150k? At this point, wouldn't your business have hundreds of employees? Also IIUC startup equity value (for tax purposes) is typically based on the startup's 409(a) price, which I think is pretty different from investor valuations, since investors get preferred stock (among other differences)
- maxk42 7y ago
  > At the point where a startup is being valued at 800M (and therefore raising rounds of ~100M?) are the founders still making 150k? Yes. > At this point, wouldn't your business have hundreds of employees? Also yes. Why does this imply you'd be making more than $150k? In most places outside of SV, $150k is enough to qualify as "Affluent".
  - deleted 7y ago
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ivalm 7y ago
If we learned anything it's that american financial institution are excellent at developing novel financial tools to resolve these issues. You're right, an owner of $160M paper money might not have 2m/year liquid, but I am sure there will be many banks willing to provide equity secured debt (perhaps no payment needed until exit!) to pay for the taxes. Also, if this pushes startups to profitability/IPO earlier, I think that's probably a good thing.

by davidu 7y ago

SubuSS 7y ago

Sorry I haven't looked through that site or even understood the plan - can someone summarize how the valuation is done? Will there be money back or credit if the valuation drops the next year? Also IIUC This seems to be a number that need paid (19MM per Billion?) every year - is that right? About a 2% tax.

undersuit 7y ago

Why is it so hard to imagine that in the presence of a wealth tax the company won't be valued at $800,000,000? When the news came out this week the Uber dropped in price it was naturally accepted it was because the lock out for employee stock sales ended.

msteffen 7y ago

At the point where a startup is being valued at 800M (and therefore raising rounds of ~100M?) are the founders still making 150k? At this point, wouldn't your business have hundreds of employees? Also IIUC startup equity value (for tax purposes) is typically based on the startup's 409(a) price, which I think is pretty different from investor valuations, since investors get preferred stock (among other differences)

maxk42 7y ago
> At the point where a startup is being valued at 800M (and therefore raising rounds of ~100M?) are the founders still making 150k? Yes. > At this point, wouldn't your business have hundreds of employees? Also yes. Why does this imply you'd be making more than $150k? In most places outside of SV, $150k is enough to qualify as "Affluent".
- deleted 7y ago
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ivalm 7y ago

If we learned anything it's that american financial institution are excellent at developing novel financial tools to resolve these issues. You're right, an owner of $160M paper money might not have 2m/year liquid, but I am sure there will be many banks willing to provide equity secured debt (perhaps no payment needed until exit!) to pay for the taxes. Also, if this pushes startups to profitability/IPO earlier, I think that's probably a good thing.