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I’m not sure why this is considered some giant revelation. Anyone who owns and holds stocks that do not pay dividends is aware that you only pay capital gains t

I’m not sure why this is considered some giant revelation. Anyone who owns and holds stocks that do not pay dividends is aware that you only pay capital gains taxes when you sell. Why is this a surprise? I’m not against heavily revising the tax code, but I’m not sure a wealth tax is the way to do it. I’d rather we tax the utility of money rather than the quantity (e.g., a billionaire who spends millions on cancer research will not have that money taxed, but one who spends millions on yachts and super cars will pay 90% tax). Society could then vote to determine what things should have high and low taxes.

deleted 5y ago
[deleted]
willj 5y ago
Taxing a quantity is way simpler to implement, and maybe more effective, than making a huge list of items to tax, thereby creating loopholes.
- endymi0n 5y ago
  This. > yachts and super cars will pay 90% tax Oh really? But car parts are just 20% so let‘s just cut the Veyron in half before delivery. And the yacht is better privately rented from that Serbian shell company whose business model it is to just own one boat and rent it to a single person. Rich people are smart and greedy. And if they aren‘t, so are their tax advisors. There is a massive case for simplicity in tax code, even if it does not fit perfectly. Minimum gloval tax, revenue tax, Tobin tax, high inheritance tax (with significant tax free minimums) and a land value tax would be way harder to cheat and easier to implement.
  - ericmay 5y ago
    The only one you can’t actually cheat is property tax. The government can send someone there and seize the asset. Everything else can be avoided or fought. I think what we are seeing is the beginning of the slow destruction of the nation state which was built to fight existential and total wars. The only thing higher tax rates are going to do is push wealth out of some countries and into others, unfortunately. Why doesn’t the U.S. just invade the Bahamas and stop tax avoidance? Once you realize why, you’ll realize that just taxing more won’t work. Whether we like it or not, I think the standing down of the nation state from wars in the past is going to lead to a collapse of welfare states and social programs (I don’t use these terms negatively so don’t assume I’m “against” these programs), and continued fragmentation of large national and international organizations. Some people are very happy with their nation (Norway or Switzerland or something), others aren’t (United States, China). Those who aren’t are going to move their wealth to somewhere that is advantageous to them. Even China doesn’t stop this. Wonder why housing prices are so high in Vancouver? Most people for most of history haven’t lived in anything approaching a nation state. It’s a new thing, and it is likely in my view to be temporary. It’s hard for us to see because it’s what we were born into and our perspectives are short term.
    - thow-01187 5y ago
      What about the following proposition - any publicly traded company must issue, every calendar year, new shares worth of 2% of the total shares outstanding, and transfer them to the tax office. That's essentially a 2% wealth tax on the stock market, borne equally by all shareholders, regardless of their residence. Maybe I'm just naive, but I don't see any accounting magic to avoid such a tax. But then again - there's one agenda that unites left and right across the developed world - no wealth taxes.
      - ericmay 5y ago
        The tax office where? In the United States? Maybe companies would just stop “going public” or would become publicly traded in another jurisdiction. Or maybe France doesn’t like that China says French companies have to issue 2% per year in new shares to operate in China. Or better yet, how do you do this in all countries? Is it 2%/year in all countries? Etc. I think there are a lot of scenarios to think through. -edit- Didn’t downvote you BTW. Shame on those who are when you’re just having a discussion. We really need to get rid of that as a tool.
    - RyanHamilton 5y ago
      Interesting points. Can you provide a definition of your nation state?
      - ericmay 5y ago
        I'd just say you can think of it in colloquial terms. China is a nation state, as is France, Germany, Russia, Venezuela, etc. Some are looser than others, some are stronger. Along these lines I think ethnicity and homogeneity play a part but not always. There's some room for argument about who and what are nation states - does the Bahamas qualify as a nation state or just a convenient government? Are some countries stronger nation states? What's the difference between countries and nation states? Is there one? There are probably some items to explore there for me too. Maybe there's something you have in mind you want to discuss with respect to the concept of the nation state?
    - 5y ago
danielh 5y ago
This might come as a surprise to folks who do not own stocks and are not aware of the difference between income and (unrealized) capital gains. According to this article [1] from 2020, about half of American families owned stocks. But only 14% own stocks directly, the rest is through retirement accounts. The media does their part with sensationalist headlines like "Jeff Bezos got 100B richer during the pandemic". Without some financial literacy, someone might interpret this that someone handed Jeff Bezos a 100B paycheck. [1] https://www.forbes.com/sites/teresaghilarducci/2020/08/31/most-americans-dont-have-a-real-stake-in-the-stock-market/?sh=5ee662d81154 https://www.forbes.com/sites/teresaghilarducci/2020/08/31/mo...
- koolba 5y ago
  The same outlets that publish those headlines also publish ones like “Company XYZ made billions in revenue and paid zero in taxes”, completely glossing over payroll tax, deferred losses, and credits for capital investment.
  - taneq 5y ago
    This one makes me so mad, because it's always some ignoramus comparing taxes with revenue and ignoring the fact that if the company paid zero taxes then most or all of that revenue was ploughed back into the local economy. Jobs, construction, equipment, etc. all mean that cash lands on everyone, and then people swallow the spin and complain about it. Now, if they were making billions in profit and paying zero taxes then that's different.
    - ansible 5y ago
      > Now, if they were making billions in profit and paying zero taxes then that's different. Some companies are, and are very clever in hiding that (offshoring profits, etc.). Other companies (and their boards apparently) are content with "merely" overcompensating their executives, who then have their own teams of accountants and lawyers to avoid paying taxes. The companies themselves aren't running much profit, on the promise of a better stock price and future growth. In some cases this is legitimate because they are indeed investing in their own infrastructure or intellectual property.
sslayer 5y ago
No way that would be manipulated and abused by the politicians and the wealthy. I think at some point we have to accept that people are going to game any system (on all sides and angles). Resource competition is the base problem.
- markdown 5y ago
  Simply replace these taxes with a single Land Value Tax. You can't game that one.
  - ceejayoz 5y ago
    Sure you can; people game land/house value assessments all the time. I live in an area with high property taxes, and there's an entire little industry of firms who will fight your assessment battles.
    - tome 5y ago
      There are clever ways of addressing gaming, for example, to counter undervaluation there could be a rule that says that if you value your land at $X then anyone is legally allowed to force you to sell it to them for $X. This works both ways. If the government overvalues your land at $X then you can force them to purchase it from you for that much, for example.
      - lelanthran 5y ago
        > There are clever ways of addressing gaming, for example, to counter undervaluation there could be a rule that says that if you value your land at $X then anyone is legally allowed to force you to sell it to them for $X. That doesn't work. Just because I inherited my fathers beloved VW Beetle[1] that's only worth $1000 doesn't mean that I want to part with my father's beloved VW Beetle; it means much more to me than the official valuation. Same goes for any other property - boats, land, etc. [1] Example only, I did not
        5y ago
tsuru 5y ago
From the American perspective, they still have too much to spend on corrupting politics and justice hiding behind "spending money is free speech." There needs to be a 90% tax bracket and we should subject capital gains to normal tax brackets if percentage of gross income is, say, 50% or higher. This makes more sense to me versus total wealth tax. Also reinstate a meaningful inheritance tax (aristocracy-prevention tax)
- taurath 5y ago
  The lack of a wealth tax means they just get to pick and choose when they take their income out of their assets, always at the most favorable time. Capital gains going up wouldn’t make much of a dent in someone paying under 5%.
  - tomrod 5y ago
    Right, this is a benefit of ownership is having control of how an asset is used.
- deleted 5y ago
  [deleted]
cpursley 5y ago
I think replacing income tax with a progressive consumption tax is something worth considering (or at least modeling out). Currently the bottom half of W2 earners in the US don't pay any income tax and the wealthiest only pay capital gains. It doesn't seem fair that the upper middle income earners carry so much if the tax burden (at least as a percentage of their wealth). We also need to get away from the idea of taxation "as punishment" and think about it in terms of "what does funding the system actually require".
- seunosewa 5y ago
  No one type of tax is the best. The key to effective taxation is to have many different kinds of tax so that there's no way for the rich to avoid paying any taxes at all by reorganizing their financial affairs. So if you avoid one kind of tax, then you'll have to pay more of a different kind of tax. So a progressive consumption tax is perhaps a great addition to income tax, not a substitute.
  - throwaway0a5e 5y ago
    > The key to effective taxation is to have many different kinds of tax so that there's no way for the rich to avoid paying any taxes at all by reorganizing their financial affairs. Or just tax less to increase the wealth floor where avoiding it becomes useful thereby decreasing the number of people who do it thereby reducing the losses. You're basically reducing amplitude of the tax curve in order to capture a wider range. The billionaires may be stupid rich but there's so few of them they make up a negligible percent of public coffers. Nobody bothers registering their car out of state to save a $50 fee. Nobody bothers putting their house in a trust to save a couple thousand in taxes. Not hard to extrapolate from there.
  - someguydave 5y ago
    are you interested in minimizing economic distortion or punishing rich people?
    - seunosewa 5y ago
DoreenMichele 5y ago
I’m not sure why this is considered some giant revelation. The very first paragraph: ProPublica is a nonprofit newsroom that investigates abuses of power. The Secret IRS Files is an ongoing reporting project. (Among other things) "News" tends to be bad news. This is a well known fact and if you try to google up studies on news and mental health, it will likely auto-complete (or auto-suggest) a phrase for you. Not to say it isn't a valid criticism and not to suggest it's in any way untrue, but among other things, I have had a class in journalism and I'm a writer by trade and recent years have been very hard on traditional news outlets. The competition for eyeballs is really fierce and lots of publications are struggling to survive or outright going under, much to the detriment of the quality of journalistic writing you can find today. Writers are being paid less in real terms. They can't do the kind of research they used to do. Etc.
rvba 5y ago
You omit the fact that billionaires supposedly never realize their gains, yet they somehow are able to afford mansions and planes (not company owned). The gains are realized, but due to various loopholes untaxed diaposable cash is created. How does this happen and why is it legal? Obviously there are ways (e.g. borrowing money against stock) - but maybe this should be closed? If you are a regular person your wages are taxed and then you build a house using taxed materials. If you are rich you borrow money against shares to a trust in a tax haven and then that trust builds a home for you as a company (so not even tax on materials) and you get an untaxed home where you can live.
- paul_f 5y ago
  Not sure we can make borrowing money illegal. For example, is it OK to have a second mortgage backed by the equity in your home?
- Frost1x 5y ago
  Definitely the significant difference. It's not just that the ultra wealthy can stash money in these sort of asset havens and avoid taxes, it's that they can somehow use them as liquid as cash. Your average person may have access to some of the asset storage options, like wealth stored in their 401k or even purchasing stocks directly. What we can't do is use those assets as if they're money in a bank account and avoid tax. I can lower my income by stashing money in my 401k and defer taxes until I retire but when I retire, I will pay taxes and between now and then, those assets can't be touched for much beyond an emergency without incurring fees, taxes, etc. Wealth is very different than income but if wealth can be utilized just like income (liquidated) yet not taxed, something is off in the tax system and this is what people get cranky about. If the assets weren't as liquid and usable in place of cash and had to be tucked away or otherwise taxed, less people would be cranky. For all intents and purposes for the ultra wealthy, that wealth is readily accessible, well above the amount of money they could need or most could even want which people equate to their income. They might not quickly liquidate their entire estate but they can liquidate or borrow against large enough portions that they can do about anything they want.
  - 5y ago
bzbarsky 5y ago
The US used to have a lot more "luxury taxes" on things like yachts. They got repealed "because they were hurting jobs in the industry" (e.g. the yacht industry). Leading Democrats at the time led the repeal push... What would be ideal, in some ways, is a progressive consumption tax, with the hard parts being defining consumption (e.g. is cancer research consumption?) and actually measuring it....

deleted 5y ago

[deleted]

willj 5y ago

Taxing a quantity is way simpler to implement, and maybe more effective, than making a huge list of items to tax, thereby creating loopholes.

endymi0n 5y ago
This. > yachts and super cars will pay 90% tax Oh really? But car parts are just 20% so let‘s just cut the Veyron in half before delivery. And the yacht is better privately rented from that Serbian shell company whose business model it is to just own one boat and rent it to a single person. Rich people are smart and greedy. And if they aren‘t, so are their tax advisors. There is a massive case for simplicity in tax code, even if it does not fit perfectly. Minimum gloval tax, revenue tax, Tobin tax, high inheritance tax (with significant tax free minimums) and a land value tax would be way harder to cheat and easier to implement.
- ericmay 5y ago
  The only one you can’t actually cheat is property tax. The government can send someone there and seize the asset. Everything else can be avoided or fought. I think what we are seeing is the beginning of the slow destruction of the nation state which was built to fight existential and total wars. The only thing higher tax rates are going to do is push wealth out of some countries and into others, unfortunately. Why doesn’t the U.S. just invade the Bahamas and stop tax avoidance? Once you realize why, you’ll realize that just taxing more won’t work. Whether we like it or not, I think the standing down of the nation state from wars in the past is going to lead to a collapse of welfare states and social programs (I don’t use these terms negatively so don’t assume I’m “against” these programs), and continued fragmentation of large national and international organizations. Some people are very happy with their nation (Norway or Switzerland or something), others aren’t (United States, China). Those who aren’t are going to move their wealth to somewhere that is advantageous to them. Even China doesn’t stop this. Wonder why housing prices are so high in Vancouver? Most people for most of history haven’t lived in anything approaching a nation state. It’s a new thing, and it is likely in my view to be temporary. It’s hard for us to see because it’s what we were born into and our perspectives are short term.
  - thow-01187 5y ago
    What about the following proposition - any publicly traded company must issue, every calendar year, new shares worth of 2% of the total shares outstanding, and transfer them to the tax office. That's essentially a 2% wealth tax on the stock market, borne equally by all shareholders, regardless of their residence. Maybe I'm just naive, but I don't see any accounting magic to avoid such a tax. But then again - there's one agenda that unites left and right across the developed world - no wealth taxes.
    - ericmay 5y ago
      The tax office where? In the United States? Maybe companies would just stop “going public” or would become publicly traded in another jurisdiction. Or maybe France doesn’t like that China says French companies have to issue 2% per year in new shares to operate in China. Or better yet, how do you do this in all countries? Is it 2%/year in all countries? Etc. I think there are a lot of scenarios to think through. -edit- Didn’t downvote you BTW. Shame on those who are when you’re just having a discussion. We really need to get rid of that as a tool.
  - RyanHamilton 5y ago
    Interesting points. Can you provide a definition of your nation state?
    - ericmay 5y ago
      I'd just say you can think of it in colloquial terms. China is a nation state, as is France, Germany, Russia, Venezuela, etc. Some are looser than others, some are stronger. Along these lines I think ethnicity and homogeneity play a part but not always. There's some room for argument about who and what are nation states - does the Bahamas qualify as a nation state or just a convenient government? Are some countries stronger nation states? What's the difference between countries and nation states? Is there one? There are probably some items to explore there for me too. Maybe there's something you have in mind you want to discuss with respect to the concept of the nation state?
  - 5y ago

danielh 5y ago

This might come as a surprise to folks who do not own stocks and are not aware of the difference between income and (unrealized) capital gains. According to this article [1] from 2020, about half of American families owned stocks. But only 14% own stocks directly, the rest is through retirement accounts. The media does their part with sensationalist headlines like "Jeff Bezos got 100B richer during the pandemic". Without some financial literacy, someone might interpret this that someone handed Jeff Bezos a 100B paycheck. [1] https://www.forbes.com/sites/teresaghilarducci/2020/08/31/most-americans-dont-have-a-real-stake-in-the-stock-market/?sh=5ee662d81154 https://www.forbes.com/sites/teresaghilarducci/2020/08/31/mo...

koolba 5y ago
The same outlets that publish those headlines also publish ones like “Company XYZ made billions in revenue and paid zero in taxes”, completely glossing over payroll tax, deferred losses, and credits for capital investment.
- taneq 5y ago
  This one makes me so mad, because it's always some ignoramus comparing taxes with revenue and ignoring the fact that if the company paid zero taxes then most or all of that revenue was ploughed back into the local economy. Jobs, construction, equipment, etc. all mean that cash lands on everyone, and then people swallow the spin and complain about it. Now, if they were making billions in profit and paying zero taxes then that's different.
  - ansible 5y ago
    > Now, if they were making billions in profit and paying zero taxes then that's different. Some companies are, and are very clever in hiding that (offshoring profits, etc.). Other companies (and their boards apparently) are content with "merely" overcompensating their executives, who then have their own teams of accountants and lawyers to avoid paying taxes. The companies themselves aren't running much profit, on the promise of a better stock price and future growth. In some cases this is legitimate because they are indeed investing in their own infrastructure or intellectual property.

sslayer 5y ago

No way that would be manipulated and abused by the politicians and the wealthy. I think at some point we have to accept that people are going to game any system (on all sides and angles). Resource competition is the base problem.

markdown 5y ago
Simply replace these taxes with a single Land Value Tax. You can't game that one.
- ceejayoz 5y ago
  Sure you can; people game land/house value assessments all the time. I live in an area with high property taxes, and there's an entire little industry of firms who will fight your assessment battles.
  - tome 5y ago
    There are clever ways of addressing gaming, for example, to counter undervaluation there could be a rule that says that if you value your land at $X then anyone is legally allowed to force you to sell it to them for $X. This works both ways. If the government overvalues your land at $X then you can force them to purchase it from you for that much, for example.
    - lelanthran 5y ago
      > There are clever ways of addressing gaming, for example, to counter undervaluation there could be a rule that says that if you value your land at $X then anyone is legally allowed to force you to sell it to them for $X. That doesn't work. Just because I inherited my fathers beloved VW Beetle[1] that's only worth $1000 doesn't mean that I want to part with my father's beloved VW Beetle; it means much more to me than the official valuation. Same goes for any other property - boats, land, etc. [1] Example only, I did not
      - 5y ago

tsuru 5y ago

From the American perspective, they still have too much to spend on corrupting politics and justice hiding behind "spending money is free speech." There needs to be a 90% tax bracket and we should subject capital gains to normal tax brackets if percentage of gross income is, say, 50% or higher. This makes more sense to me versus total wealth tax. Also reinstate a meaningful inheritance tax (aristocracy-prevention tax)

taurath 5y ago
The lack of a wealth tax means they just get to pick and choose when they take their income out of their assets, always at the most favorable time. Capital gains going up wouldn’t make much of a dent in someone paying under 5%.
- tomrod 5y ago
  Right, this is a benefit of ownership is having control of how an asset is used.
deleted 5y ago
[deleted]

cpursley 5y ago

I think replacing income tax with a progressive consumption tax is something worth considering (or at least modeling out). Currently the bottom half of W2 earners in the US don't pay any income tax and the wealthiest only pay capital gains. It doesn't seem fair that the upper middle income earners carry so much if the tax burden (at least as a percentage of their wealth). We also need to get away from the idea of taxation "as punishment" and think about it in terms of "what does funding the system actually require".

seunosewa 5y ago
No one type of tax is the best. The key to effective taxation is to have many different kinds of tax so that there's no way for the rich to avoid paying any taxes at all by reorganizing their financial affairs. So if you avoid one kind of tax, then you'll have to pay more of a different kind of tax. So a progressive consumption tax is perhaps a great addition to income tax, not a substitute.
- throwaway0a5e 5y ago
  > The key to effective taxation is to have many different kinds of tax so that there's no way for the rich to avoid paying any taxes at all by reorganizing their financial affairs. Or just tax less to increase the wealth floor where avoiding it becomes useful thereby decreasing the number of people who do it thereby reducing the losses. You're basically reducing amplitude of the tax curve in order to capture a wider range. The billionaires may be stupid rich but there's so few of them they make up a negligible percent of public coffers. Nobody bothers registering their car out of state to save a $50 fee. Nobody bothers putting their house in a trust to save a couple thousand in taxes. Not hard to extrapolate from there.
- someguydave 5y ago
  are you interested in minimizing economic distortion or punishing rich people?
  - seunosewa 5y ago

DoreenMichele 5y ago

I’m not sure why this is considered some giant revelation. The very first paragraph: ProPublica is a nonprofit newsroom that investigates abuses of power. The Secret IRS Files is an ongoing reporting project. (Among other things) "News" tends to be bad news. This is a well known fact and if you try to google up studies on news and mental health, it will likely auto-complete (or auto-suggest) a phrase for you. Not to say it isn't a valid criticism and not to suggest it's in any way untrue, but among other things, I have had a class in journalism and I'm a writer by trade and recent years have been very hard on traditional news outlets. The competition for eyeballs is really fierce and lots of publications are struggling to survive or outright going under, much to the detriment of the quality of journalistic writing you can find today. Writers are being paid less in real terms. They can't do the kind of research they used to do. Etc.

rvba 5y ago

You omit the fact that billionaires supposedly never realize their gains, yet they somehow are able to afford mansions and planes (not company owned). The gains are realized, but due to various loopholes untaxed diaposable cash is created. How does this happen and why is it legal? Obviously there are ways (e.g. borrowing money against stock) - but maybe this should be closed? If you are a regular person your wages are taxed and then you build a house using taxed materials. If you are rich you borrow money against shares to a trust in a tax haven and then that trust builds a home for you as a company (so not even tax on materials) and you get an untaxed home where you can live.

paul_f 5y ago
Not sure we can make borrowing money illegal. For example, is it OK to have a second mortgage backed by the equity in your home?
Frost1x 5y ago
Definitely the significant difference. It's not just that the ultra wealthy can stash money in these sort of asset havens and avoid taxes, it's that they can somehow use them as liquid as cash. Your average person may have access to some of the asset storage options, like wealth stored in their 401k or even purchasing stocks directly. What we can't do is use those assets as if they're money in a bank account and avoid tax. I can lower my income by stashing money in my 401k and defer taxes until I retire but when I retire, I will pay taxes and between now and then, those assets can't be touched for much beyond an emergency without incurring fees, taxes, etc. Wealth is very different than income but if wealth can be utilized just like income (liquidated) yet not taxed, something is off in the tax system and this is what people get cranky about. If the assets weren't as liquid and usable in place of cash and had to be tucked away or otherwise taxed, less people would be cranky. For all intents and purposes for the ultra wealthy, that wealth is readily accessible, well above the amount of money they could need or most could even want which people equate to their income. They might not quickly liquidate their entire estate but they can liquidate or borrow against large enough portions that they can do about anything they want.
- 5y ago

bzbarsky 5y ago

The US used to have a lot more "luxury taxes" on things like yachts. They got repealed "because they were hurting jobs in the industry" (e.g. the yacht industry). Leading Democrats at the time led the repeal push... What would be ideal, in some ways, is a progressive consumption tax, with the hard parts being defining consumption (e.g. is cancer research consumption?) and actually measuring it....