5 ms·

That's not an "intentional misdirection", it's undeniably true. > what would more likely happen is that loan products and other financial instruments and techn

by bhupy 6y ago

That's not an "intentional misdirection", it's undeniably true. > what would more likely happen is that loan products and other financial instruments and techniques would pop up so you could pay the taxes in a whole host of ways without actually losing the underlying shares that are used as collateral. In order to pay back a loan, you have to realize some gain somewhere. That money isn't free. Even to simply pay back the interest, you would have to liquidate some of your own stock (which is taxed). Eventually when the principal needs to be paid back, the only way to do it is to liquidate the equivalent value in your own company.

clairity 6y ago
your response seems to lack the creativity and imagination of a financial industry that brought us cdo's, cds's, mbs's, and a global financial crisis or three. greed and money will find a way. edit: it seems folks don't like being reminded that the point of capitalism is to redirect greed toward productive use.
- bhupy 6y ago
  This is as hand-wavy and un-falsifiable as the argument "the invisible hand will solve all our problems".
eloff 6y ago
Your company can pay dividends and you can use that to pay the tax. It essentially becomes an operating tax on the company based not on its profit, but its value. What's interesting about that is it would work for companies like Amazon that intentionally engineer zero profits so as to avoid taxes.
- bhupy 6y ago
  > What's interesting about that is it would work for companies like Amazon that intentionally engineer zero profits so as to avoid taxes. They "engineer" zero profits by re-investing their surplus back into R&D — a behavior explicitly encouraged by the government and the tax code. In 2010, Amazon had about 100,000 employees. Today they have almost 1 MILLION. That's what "reinvesting profits into R&D" looks like, in practice. > Your company can pay dividends and you can use that to pay the tax. You're essentially talking about adding a countering incentive away from investing in R&D, and toward paying shareholder dividends, which...why? There are way more intelligent and non-distortionary ways to raise funds for a government (eg increasing the capital gains tax).
  - eloff 6y ago
    I'm not sold on the idea, merely answering the parent comment that paying the tax would require selling shares. That's not necessarily true. There's a lot to be said for property taxes. Taxes on income and wealth are disincentives for things you wnt more of. Property tax is one of the least destructive of taxes. I'm also of a mind that carbon and pollution taxes would be good as well, since the disincentive would be a plus in that case.
    - bhupy 6y ago
      > There's a lot to be said for property taxes. Taxes on income and wealth are disincentives for things you wnt more of. Property tax is one of the least destructive of taxes. Yeah but a wealth tax is not the same as a property tax, because unlike land, wealth is not zero-sum, it's created. In fact, the most economically efficient property tax is the Georgist Land Value Tax which typically deducts the appraised value of improvements before applying the tax, because we don't want to tax productive improvement of land. Taxing wealth OTOH has the effect of taxing the productive creation of wealth. It's like an inverse Land Value Tax, where you allow one to deduct the value of the underlying land, but simply levy a tax on the appraised value of improvements, just because one might be improving the land "too much". Also, property taxes are unconstitutional at the Federal level. This is why there is no such thing as a Federal property tax, today. If we wanted a Federal wealth tax, we would have to amend the Constitution.
  - triceratops 6y ago
    > You're essentially talking about adding a countering incentive away from investing in R&D, and toward paying shareholder dividends, which...why? So shareholders can choose where to allocate those dollars? What's bad about that?
    - bhupy 6y ago
      There's nothing wrong with shareholder dividends, but to add an extra incentive to pay dividends is distortionary and doesn't make much economic sense. On the contrary, society appears to want to minimize shareholder dividends because that's money that's not going to worker salaries and R&D. It also ignores the fact that if Amazon had been forced to pay dividends 10 years ago, the stock would be worth significantly less today on account of their inability to re-invest into R&D and enter new business lines and grow from 100,000 -> 1 million employees. Even if we aim to strictly maximize shareholder-value (to the extent that's even desirable), it's penny wise but pound foolish.

by bhupy 6y ago

clairity 6y ago

your response seems to lack the creativity and imagination of a financial industry that brought us cdo's, cds's, mbs's, and a global financial crisis or three. greed and money will find a way. edit: it seems folks don't like being reminded that the point of capitalism is to redirect greed toward productive use.

bhupy 6y ago
This is as hand-wavy and un-falsifiable as the argument "the invisible hand will solve all our problems".

eloff 6y ago

Your company can pay dividends and you can use that to pay the tax. It essentially becomes an operating tax on the company based not on its profit, but its value. What's interesting about that is it would work for companies like Amazon that intentionally engineer zero profits so as to avoid taxes.

bhupy 6y ago
> What's interesting about that is it would work for companies like Amazon that intentionally engineer zero profits so as to avoid taxes. They "engineer" zero profits by re-investing their surplus back into R&D — a behavior explicitly encouraged by the government and the tax code. In 2010, Amazon had about 100,000 employees. Today they have almost 1 MILLION. That's what "reinvesting profits into R&D" looks like, in practice. > Your company can pay dividends and you can use that to pay the tax. You're essentially talking about adding a countering incentive away from investing in R&D, and toward paying shareholder dividends, which...why? There are way more intelligent and non-distortionary ways to raise funds for a government (eg increasing the capital gains tax).
- eloff 6y ago
  I'm not sold on the idea, merely answering the parent comment that paying the tax would require selling shares. That's not necessarily true. There's a lot to be said for property taxes. Taxes on income and wealth are disincentives for things you wnt more of. Property tax is one of the least destructive of taxes. I'm also of a mind that carbon and pollution taxes would be good as well, since the disincentive would be a plus in that case.
  - bhupy 6y ago
    > There's a lot to be said for property taxes. Taxes on income and wealth are disincentives for things you wnt more of. Property tax is one of the least destructive of taxes. Yeah but a wealth tax is not the same as a property tax, because unlike land, wealth is not zero-sum, it's created. In fact, the most economically efficient property tax is the Georgist Land Value Tax which typically deducts the appraised value of improvements before applying the tax, because we don't want to tax productive improvement of land. Taxing wealth OTOH has the effect of taxing the productive creation of wealth. It's like an inverse Land Value Tax, where you allow one to deduct the value of the underlying land, but simply levy a tax on the appraised value of improvements, just because one might be improving the land "too much". Also, property taxes are unconstitutional at the Federal level. This is why there is no such thing as a Federal property tax, today. If we wanted a Federal wealth tax, we would have to amend the Constitution.
- triceratops 6y ago
  > You're essentially talking about adding a countering incentive away from investing in R&D, and toward paying shareholder dividends, which...why? So shareholders can choose where to allocate those dollars? What's bad about that?
  - bhupy 6y ago
    There's nothing wrong with shareholder dividends, but to add an extra incentive to pay dividends is distortionary and doesn't make much economic sense. On the contrary, society appears to want to minimize shareholder dividends because that's money that's not going to worker salaries and R&D. It also ignores the fact that if Amazon had been forced to pay dividends 10 years ago, the stock would be worth significantly less today on account of their inability to re-invest into R&D and enter new business lines and grow from 100,000 -> 1 million employees. Even if we aim to strictly maximize shareholder-value (to the extent that's even desirable), it's penny wise but pound foolish.