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What I don't understand is: If I (a wage slave) find a football sized diamond in my back yard, I'm suddenly very "wealthy". Should I be forced to pay taxes on t

What I don't understand is: If I (a wage slave) find a football sized diamond in my back yard, I'm suddenly very "wealthy". Should I be forced to pay taxes on that find because my wealth has increased? What if I want to keep that diamond but cannot afford to because of the taxes? Isn't that how business owners gain wealth: By the valuation defined by others to the thing they "found". Should we force Bezos et al to sell some of their stock in their companies to pay tax? Surely a $100m+ tax burden would do that?

dataangel 5y ago
You don't pay capital gains taxes until you sell the stock. The IRS only taxes you when you cash out. Presumably the articles will show the wealthy "cashing out" via loopholes that evade the tax.
- mrkurt 5y ago
  The trick is to cash out by dying. You can do this by living off loans against your unrealized capital gains. These then get paid off at your death, and there are all kinds of "simple" ways to keep estate untaxed.
  - rbtprograms 5y ago
    I have a friend who is a member of the ultra rich, and this is exactly how his family uses their portfolio. They currently can borrow with .03% interest through their brokerage.
  - kasey_junk 5y ago
    What I’m curious about is at what level of funds flows does it make sense to start using these strategies. The average faang employees income is dominated by shares but a) they weren’t granted in the distant past when the prices were lower so the tax difference isn’t big between income and b) they have different risk tolerances as Bezos can lose half of his net worth and still be unable to spend all his money before he dies. There must be some level where these strategies make sense but articles like this rarely point them out.
mrkurt 5y ago
You do own taxes if you find a diamond. You don't owe taxes if you buy a rock for $10 and it increases in value to $50m. If you want to keep something you find and can't afford to because of taxes, you either get a loan or have to sell it.
mjmahone17 5y ago
> What if I want to keep that diamond but cannot afford to because of the taxes? Then you have to sell it. This is no different from game show awards, where the “car” you ein is taxed at the car’s value, so unless you have enough savings, you have to sell the car to pay the taxes. I don’t really see any problem with this though? Absolutely we should force Bezos to sell some of his stock to pay taxes: employees already have to do this when they’re given stock grants, why should it be any different for owners?
- jvanderbot 5y ago
  But why should someone be forced to sell parts of their business (stock) because that business has increased in value? Or is that not the claim being made here? Isn't that the vast majority of the richests' wealth?
  - mjmahone17 5y ago
    Why do we tax property more (outside California) when it increases in value? Didn’t the owner of it rightfully make a smart claim and stake out a great piece of land? Why should they be penalized by paying more when the land becomes worth more? In short: there’s no amount of personal “hard work” that made Bezos’ company worth what it is: the vast majority of the gains are due to his employees’ work and having staked a claim on the right plots of business ventures. Absolutely Bezos should be rewarded for making those smart decisions, but why should he take the vast majority of the gains, when he was not responsible for the vast majority of the value added? Allowing a few individuals to amass a fortune larger than the non-US NATO budget, while we’re at the same time facing human-extinction level threats, feels a little absurd on its face. Moving the needle towards any one individual only having more power than a few thousand average people, rather than a few million, seems fine?
  - boublepop 5y ago
    We have a system based around the notion that when a worker is given money or other value in exchange for work, part of their value increase needs to be transferred to the state. That is the same even if you get a car in compensation instead if a paycheck. Why should the system be such that if you gain value without exchange of work, then suddenly you should not transfer anything to the state? Yes that means that you might need to liquidate part of the asset to cover taxes on its value, just like paying a workers sallee by giving them a car might mean they need to sell it to cover taxes. But it’s extremely odd to argue that there is some inherent “unfairness” in Musk or Buffet having to transfer part of their value increases to the state when we all agree every worker should do this.
scott_w 5y ago
This is a strawman argument. Bezos did not stumble across Amazon while digging weeds in his back garden. He built a successful business through a mixture of hard work, risk, his contacts, laws and infrastructure that we collectively paid for. It’s not downplaying his efforts to point out that he now contributes proportionally less to the country than he benefits from. This isn’t an accident, either. Bezos pays smart and connected people to push for lower taxes and then avoid as many of those as possible.
- jvanderbot 5y ago
  No, it was a question, not an argument. Let me restate it: Buying a stock (or bitcoin) uses gobs of the same regulated, government-funded infrastructure. If that stock/coin becomes immensely valuable, that (the fact that I now have a high net worth) makes me "wealthy". What I'm asking is: Please clarify whether the intent is to tax people based on their net worth (wealth), not their income. The articles are not clear. They state that capital gains are lower than income taxes, but they are not 1%. Yet they state that Bezos paid less than 1% effective tax rate on his wealth increases. Implying that it's obvious we should have taxed that. It's not obvious. Presumably, and I'm asking for clarification here, he would eventually be taxed on that wealth when he liquidates it. If so, forcing someone to liquidate by placing a high tax burden on them is unprecedented for stock holdings and other forms of wealth, but not unprecedented for, say, land valuations.
  - scott_w 5y ago
    Look at the countless issues raised by people being unable to exercise stock options for tax reasons. It’s clear that taxing stock is NOT unprecedented. We’ve seen repeatedly over the past 50 years that Bezos will NOT be taxed of that wealth under the current system. There’s nothing sacred about different types of wealth. The question is whether society can benefit more from taxing and redistributing that wealth, or whether Bezos can by hoarding it. I don’t just mean the raw tax receipts either. Tax policy influences behaviour, too. This has ups and downs but arguing about finding diamonds in the dirt isn’t a remotely similar analogue to the discussion at hand.
34679 5y ago
Should you be able to take out a million dollar loan against the diamond, use the loan to buy stocks, and claim a loss on the year? Then the stocks increase in value, you're able to take out a new loan against them, and use that to pay off the diamond loan. Now you have a diamond, stocks, and no taxable income. Of course, you rinse and repeat. Maybe we need to re-examine the definition of "realized gains".
LargeWu 5y ago
When you own stocks, you don't pay taxes every time the value of your portfolio changes. You only pay capital gains when you sell those stocks. Your example isn't really that much different. You would only really need to pay taxes on that diamond when you sell it, in which case you would just use the proceeds of the sale to cover that.
- jvanderbot 5y ago
  Right. But the article (and I think the general consensus around the movement) states that the net worth (wealth) is a missed tax opportunity, regardless of whether it is liquidated. Is that correct?

dataangel 5y ago

You don't pay capital gains taxes until you sell the stock. The IRS only taxes you when you cash out. Presumably the articles will show the wealthy "cashing out" via loopholes that evade the tax.

mrkurt 5y ago
The trick is to cash out by dying. You can do this by living off loans against your unrealized capital gains. These then get paid off at your death, and there are all kinds of "simple" ways to keep estate untaxed.
- rbtprograms 5y ago
  I have a friend who is a member of the ultra rich, and this is exactly how his family uses their portfolio. They currently can borrow with .03% interest through their brokerage.
- kasey_junk 5y ago
  What I’m curious about is at what level of funds flows does it make sense to start using these strategies. The average faang employees income is dominated by shares but a) they weren’t granted in the distant past when the prices were lower so the tax difference isn’t big between income and b) they have different risk tolerances as Bezos can lose half of his net worth and still be unable to spend all his money before he dies. There must be some level where these strategies make sense but articles like this rarely point them out.

mrkurt 5y ago

You do own taxes if you find a diamond. You don't owe taxes if you buy a rock for $10 and it increases in value to $50m. If you want to keep something you find and can't afford to because of taxes, you either get a loan or have to sell it.

mjmahone17 5y ago

> What if I want to keep that diamond but cannot afford to because of the taxes? Then you have to sell it. This is no different from game show awards, where the “car” you ein is taxed at the car’s value, so unless you have enough savings, you have to sell the car to pay the taxes. I don’t really see any problem with this though? Absolutely we should force Bezos to sell some of his stock to pay taxes: employees already have to do this when they’re given stock grants, why should it be any different for owners?

jvanderbot 5y ago
But why should someone be forced to sell parts of their business (stock) because that business has increased in value? Or is that not the claim being made here? Isn't that the vast majority of the richests' wealth?
- mjmahone17 5y ago
  Why do we tax property more (outside California) when it increases in value? Didn’t the owner of it rightfully make a smart claim and stake out a great piece of land? Why should they be penalized by paying more when the land becomes worth more? In short: there’s no amount of personal “hard work” that made Bezos’ company worth what it is: the vast majority of the gains are due to his employees’ work and having staked a claim on the right plots of business ventures. Absolutely Bezos should be rewarded for making those smart decisions, but why should he take the vast majority of the gains, when he was not responsible for the vast majority of the value added? Allowing a few individuals to amass a fortune larger than the non-US NATO budget, while we’re at the same time facing human-extinction level threats, feels a little absurd on its face. Moving the needle towards any one individual only having more power than a few thousand average people, rather than a few million, seems fine?
- boublepop 5y ago
  We have a system based around the notion that when a worker is given money or other value in exchange for work, part of their value increase needs to be transferred to the state. That is the same even if you get a car in compensation instead if a paycheck. Why should the system be such that if you gain value without exchange of work, then suddenly you should not transfer anything to the state? Yes that means that you might need to liquidate part of the asset to cover taxes on its value, just like paying a workers sallee by giving them a car might mean they need to sell it to cover taxes. But it’s extremely odd to argue that there is some inherent “unfairness” in Musk or Buffet having to transfer part of their value increases to the state when we all agree every worker should do this.

scott_w 5y ago

This is a strawman argument. Bezos did not stumble across Amazon while digging weeds in his back garden. He built a successful business through a mixture of hard work, risk, his contacts, laws and infrastructure that we collectively paid for. It’s not downplaying his efforts to point out that he now contributes proportionally less to the country than he benefits from. This isn’t an accident, either. Bezos pays smart and connected people to push for lower taxes and then avoid as many of those as possible.

jvanderbot 5y ago
No, it was a question, not an argument. Let me restate it: Buying a stock (or bitcoin) uses gobs of the same regulated, government-funded infrastructure. If that stock/coin becomes immensely valuable, that (the fact that I now have a high net worth) makes me "wealthy". What I'm asking is: Please clarify whether the intent is to tax people based on their net worth (wealth), not their income. The articles are not clear. They state that capital gains are lower than income taxes, but they are not 1%. Yet they state that Bezos paid less than 1% effective tax rate on his wealth increases. Implying that it's obvious we should have taxed that. It's not obvious. Presumably, and I'm asking for clarification here, he would eventually be taxed on that wealth when he liquidates it. If so, forcing someone to liquidate by placing a high tax burden on them is unprecedented for stock holdings and other forms of wealth, but not unprecedented for, say, land valuations.
- scott_w 5y ago
  Look at the countless issues raised by people being unable to exercise stock options for tax reasons. It’s clear that taxing stock is NOT unprecedented. We’ve seen repeatedly over the past 50 years that Bezos will NOT be taxed of that wealth under the current system. There’s nothing sacred about different types of wealth. The question is whether society can benefit more from taxing and redistributing that wealth, or whether Bezos can by hoarding it. I don’t just mean the raw tax receipts either. Tax policy influences behaviour, too. This has ups and downs but arguing about finding diamonds in the dirt isn’t a remotely similar analogue to the discussion at hand.

34679 5y ago

Should you be able to take out a million dollar loan against the diamond, use the loan to buy stocks, and claim a loss on the year? Then the stocks increase in value, you're able to take out a new loan against them, and use that to pay off the diamond loan. Now you have a diamond, stocks, and no taxable income. Of course, you rinse and repeat. Maybe we need to re-examine the definition of "realized gains".

LargeWu 5y ago

When you own stocks, you don't pay taxes every time the value of your portfolio changes. You only pay capital gains when you sell those stocks. Your example isn't really that much different. You would only really need to pay taxes on that diamond when you sell it, in which case you would just use the proceeds of the sale to cover that.

jvanderbot 5y ago
Right. But the article (and I think the general consensus around the movement) states that the net worth (wealth) is a missed tax opportunity, regardless of whether it is liquidated. Is that correct?