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I'd be happy if I could give a percentage of the shares themselves to the government as a tax payment (paying tax on the shares specifically), so I don't have t

I'd be happy if I could give a percentage of the shares themselves to the government as a tax payment (paying tax on the shares specifically), so I don't have to worry about the risk that they're overvalued by the tax agency.

IncRnd 5y ago
No, you wouldn't. Unrealized gains being taxed would eventually make you declare bankruptcy or live on the street. The government wouldn't let you pay in stock but sell stock yourself.
UnpossibleJim 5y ago
So, unless I miss what you're saying, is that you propose that the government own a share in every business that is created by way of "taxation". Is that not what you're proposing in this statement? Do they also get to leverage these shares to have a vote as to the business decisions, like any other share holder does? (assuming they have enough shares in this hypothetical share tax)
- ljf 5y ago
  Not my idea, nor one I think is perfect, but I assume they are saying this would no be every company, just those where they would rather give shares than pay tax. No doubt they would be loads of ways to scam this though, setting up supposedly valuable companies to 'pay' a big tax bill, then rinse the company or allow it to fail while diverting profit elsewhere.
  - UnpossibleJim 5y ago
    I was just saying, it sounds an awful lot like forced communism through taxation. A share in a company is a portion and a vote in a company, however small.
  - jbay808 5y ago
    I can't think of a way to scam it, as long as they only allow this method of payment for taxes assessed on the asset itself, rather than as a substitute method of payment for other taxes owed. It would be an interesting idea to explore and could potentially be a massive boon to risky startups by allowing them to hand out equity more freely as incentives without worrying about the accompanying tax burden.
- jbay808 5y ago
  The government is taxing you anyway. I'm not proposing a new tax, I'm proposing more flexibility on how they accept payment. Right now, they only accept the taxes to be remitted in dollars. For simple income tax, where you're paid in dollars and hand the government a percentage, that's fine. But what if you're paying a tax on, say, some equity you were given in a startup? This can cause huge trouble for people who have illiquid assets, like equity in a private company. You have to pay tax in dollars based on a guess of the value of that equity, even though you can't trade the equity for dollars (it's not liquid). When you eventually can sell the asset, like at an IPO, its assessed value could have decreased and it might be worth even less than the taxes you already had to pay on it. That's the kind of gift you don't want to receive. I'm suggesting that, for those who are worried about that risk, the government allow you the option of handing over a percentage of the asset instead. If it ends up being worthless paper, then the government gets nothing, but on the other hand that's also the correct amount for them to get because the tax on $0 should also be $0. Most likely, the government would choose to (or perhaps by legislation could be compelled to) sell the asset at an IPO, but that's a detail. Perhaps they could also have an agency for managing and directing such assets in the public interest.
TimTheTinker 5y ago
You might be OK with being taxed in the form of some of your stocks, but would you want to be taxed partial ownership of your real estate based on increase in its market value? What about private high-risk equity in a venture you started by risking all of your own money? It could go to zero (or millions) in a decade, but for now the government becomes an increasing shareholder because of its current YoY volatility... Taxing non-income wealth increases by any means incentivizes the government to manipulate the prices of those assets -- and more than any other entity, the government possesses the power to do so through regulation and legislation. It also makes the government the eventual largest capital owner, which could create all sorts of unintended consequences. It could sit on those assets indefinitely (like it does its liabilities) instead of selling and using the money to fund itself. There's a special kind of poverty that exists when the government owns almost everything. Also, there's a big difference between legal worth at a given time and fungible value at that time. The difference (or lack thereof) between the two could itself create all sorts of opportunities for gaming the system when fungible value becomes a basis for being taxed.
- teachingassist 5y ago
  OK. You seem to be agreeing that this would be a fine system with those caveats. So: Exemptions specifically covering residency already exist in finance law. If you go bankrupt, you can still live in your house (only if you owned it, mind). The government, as soon as practical, can auction the stock it receives. Thus identifying its value and releasing the funds.
  - TimTheTinker 5y ago
    > You seem to be agreeing that this would be a fine system with those caveats. I'm not advocating anything in particular. I'm only pointing out some potentially serious issues with the proposed system. Sure, primary residence could be excluded. But that doesn't change anything about what I said, except perhaps blunt the initial impact on the middle class. > The government, as soon as practical, can auction the stock it receives. Thus identifying its value and releasing the funds. Perhaps that could be part of the tax law. I doubt it would stay that way... once the government can own stocks and portions of real estate, I'm sure it will seek to incrementally increase its benefit from doing so. I shudder to imagine politician-beaurocrats as the most powerful hedge fund managers of tomorrow.
bombcar 5y ago
This would be a very interesting way to handle percentage taxation on assets like that. Either pay %x in cash value or give %x percent of the item to the government. Of course likely the government would just want to liquidate immediately but you could perhaps set it up as a "lien" on the stock/bond/property that gets satisfied at final sale.
- jbay808 5y ago
  They'd want to liquidate as soon as possible, but they might have to wait for a liquidity event like an IPO to do so.
- SomewhatLikely 5y ago
  I'm not sure the lien would really be any different than how capital gains taxes work today. Assuming you stayed in the same tax bracket every year.
  - bombcar 5y ago
    For many situations it’s the same but there are cases where you have to pay tax on vesting Stock but have no way of selling the stock to pay the tax. It’s rare but it can occur. It’s supposed to work out in the end as you have a higher basis at that point but you still have a liquidity issue.
koheripbal 5y ago
So the government would then be partial owner to your restaurant or mechanic shop? The government would then be partial owner to your catering business or flower store? I cannot think of a more complicated mess as the government being part-owner of half the small businesses in America.
- lupire 5y ago
  It's called a lien, payable at liquidation, and it's a simple accounting object.

IncRnd 5y ago

No, you wouldn't. Unrealized gains being taxed would eventually make you declare bankruptcy or live on the street. The government wouldn't let you pay in stock but sell stock yourself.

UnpossibleJim 5y ago

So, unless I miss what you're saying, is that you propose that the government own a share in every business that is created by way of "taxation". Is that not what you're proposing in this statement? Do they also get to leverage these shares to have a vote as to the business decisions, like any other share holder does? (assuming they have enough shares in this hypothetical share tax)

ljf 5y ago
Not my idea, nor one I think is perfect, but I assume they are saying this would no be every company, just those where they would rather give shares than pay tax. No doubt they would be loads of ways to scam this though, setting up supposedly valuable companies to 'pay' a big tax bill, then rinse the company or allow it to fail while diverting profit elsewhere.
- UnpossibleJim 5y ago
  I was just saying, it sounds an awful lot like forced communism through taxation. A share in a company is a portion and a vote in a company, however small.
- jbay808 5y ago
  I can't think of a way to scam it, as long as they only allow this method of payment for taxes assessed on the asset itself, rather than as a substitute method of payment for other taxes owed. It would be an interesting idea to explore and could potentially be a massive boon to risky startups by allowing them to hand out equity more freely as incentives without worrying about the accompanying tax burden.
jbay808 5y ago
The government is taxing you anyway. I'm not proposing a new tax, I'm proposing more flexibility on how they accept payment. Right now, they only accept the taxes to be remitted in dollars. For simple income tax, where you're paid in dollars and hand the government a percentage, that's fine. But what if you're paying a tax on, say, some equity you were given in a startup? This can cause huge trouble for people who have illiquid assets, like equity in a private company. You have to pay tax in dollars based on a guess of the value of that equity, even though you can't trade the equity for dollars (it's not liquid). When you eventually can sell the asset, like at an IPO, its assessed value could have decreased and it might be worth even less than the taxes you already had to pay on it. That's the kind of gift you don't want to receive. I'm suggesting that, for those who are worried about that risk, the government allow you the option of handing over a percentage of the asset instead. If it ends up being worthless paper, then the government gets nothing, but on the other hand that's also the correct amount for them to get because the tax on $0 should also be $0. Most likely, the government would choose to (or perhaps by legislation could be compelled to) sell the asset at an IPO, but that's a detail. Perhaps they could also have an agency for managing and directing such assets in the public interest.

TimTheTinker 5y ago

You might be OK with being taxed in the form of some of your stocks, but would you want to be taxed partial ownership of your real estate based on increase in its market value? What about private high-risk equity in a venture you started by risking all of your own money? It could go to zero (or millions) in a decade, but for now the government becomes an increasing shareholder because of its current YoY volatility... Taxing non-income wealth increases by any means incentivizes the government to manipulate the prices of those assets -- and more than any other entity, the government possesses the power to do so through regulation and legislation. It also makes the government the eventual largest capital owner, which could create all sorts of unintended consequences. It could sit on those assets indefinitely (like it does its liabilities) instead of selling and using the money to fund itself. There's a special kind of poverty that exists when the government owns almost everything. Also, there's a big difference between legal worth at a given time and fungible value at that time. The difference (or lack thereof) between the two could itself create all sorts of opportunities for gaming the system when fungible value becomes a basis for being taxed.

teachingassist 5y ago
OK. You seem to be agreeing that this would be a fine system with those caveats. So: Exemptions specifically covering residency already exist in finance law. If you go bankrupt, you can still live in your house (only if you owned it, mind). The government, as soon as practical, can auction the stock it receives. Thus identifying its value and releasing the funds.
- TimTheTinker 5y ago
  > You seem to be agreeing that this would be a fine system with those caveats. I'm not advocating anything in particular. I'm only pointing out some potentially serious issues with the proposed system. Sure, primary residence could be excluded. But that doesn't change anything about what I said, except perhaps blunt the initial impact on the middle class. > The government, as soon as practical, can auction the stock it receives. Thus identifying its value and releasing the funds. Perhaps that could be part of the tax law. I doubt it would stay that way... once the government can own stocks and portions of real estate, I'm sure it will seek to incrementally increase its benefit from doing so. I shudder to imagine politician-beaurocrats as the most powerful hedge fund managers of tomorrow.

bombcar 5y ago

This would be a very interesting way to handle percentage taxation on assets like that. Either pay %x in cash value or give %x percent of the item to the government. Of course likely the government would just want to liquidate immediately but you could perhaps set it up as a "lien" on the stock/bond/property that gets satisfied at final sale.

jbay808 5y ago
They'd want to liquidate as soon as possible, but they might have to wait for a liquidity event like an IPO to do so.
SomewhatLikely 5y ago
I'm not sure the lien would really be any different than how capital gains taxes work today. Assuming you stayed in the same tax bracket every year.
- bombcar 5y ago
  For many situations it’s the same but there are cases where you have to pay tax on vesting Stock but have no way of selling the stock to pay the tax. It’s rare but it can occur. It’s supposed to work out in the end as you have a higher basis at that point but you still have a liquidity issue.

koheripbal 5y ago

So the government would then be partial owner to your restaurant or mechanic shop? The government would then be partial owner to your catering business or flower store? I cannot think of a more complicated mess as the government being part-owner of half the small businesses in America.

lupire 5y ago
It's called a lien, payable at liquidation, and it's a simple accounting object.