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"then they rent the house from that PMC." They'll pay tax on that realized income. And if they build up all that wealth in stock value, then if we don't tax it

by coryrc 5y ago

"then they rent the house from that PMC." They'll pay tax on that realized income. And if they build up all that wealth in stock value, then if we don't tax it while they are alive we'll take it when they die, so we'd take away the incentive to hoard all the wealth with those schemes. "That’s what taxing corporate income (or more targeted, corporate assets)" Incorrect. Targeting corporate assets hurts heavy industry. Targeting income hurts low-margin business like grocery. And we already have a tax on corporate profits: capital gains tax on dividends and stock appreciation! It mostly affects people who are doing well and less so people and companies doing poorly. It automatically compensates for market changes (sector doing great paid more, a whole sector slumping pays less).

derefr 5y ago
> They'll pay tax on that realized income. And if they build up all that wealth in stock value, then if we don't tax it while they are alive we'll take it when they die, so we'd take away the incentive to hoard all the wealth with those schemes. I don't think you quite understood the scheme here: they never own the PMC. They don't gain the appreciation value of the house or anything like that. It's not an investment to them. They just got someone else to set up the PMC and buy the house, for the positive side-benefits that come from having arranged to assume (at least partial) directorship over that PMC. Maybe it's easier to picture it at larger scale, with an explicit example: say you're a famous property developer who has built a bunch of hotels with your name on them. In one sense, those are businesses for their own sake. But in another sense, those are your vacation homes. You can stay in them, for free, any time you like, which the hotel will likely book as a business expense (hosting one of its directors for an official evaluation of operations on behalf of shareholders.) That business expense will also extend to any perks the hotel offers its ultra-premium clients (often a class only set up in the first place as a way to justify giving directors these perks) — e.g. hotel-employed drivers assigned to pick the billionaire up from the airport, and then attached to them to fetch whatever they need as long as they're there. If you build a bunch of hotels that provide you a free place to stay anywhere you go, then you don't need vacation homes. You never need to buy them, rent them, own them in any sense. They're never realized as income, any more than a "company car" or "company-supplied laptop" that you need to give back when you quit is income. By itself, this would be ridiculous; it'd be like starting a car rental agency just to have a "company car." But, because these are also profitable businesses for their own sake, you can get investors (incl. your own investment businesses) to put money into them, such that you never need to put any of your own (post-tax) money into them. You don't actually even need to personally be a shareholder in the hotel chain, "only" a director of it, to reap these benefits! And, if you're also a person with a lot of connections — someone with a rolodex of reliable CEOs and executives to staff these businesses with — then you never need to worry about actually building or running the business, either. This is how billionaires — or at least, capitalist billionaires — get away with never realizing much income (or even having very many estate-tax-able assets as part of their net worth!) at all. They just cause corporations to invest money in other corporations, never actually touching any of the money or the resulting assets themselves, but rather ending up in arrangements where business expenses of the invested-in corporations are being spent directly on their own happiness, mostly by having temporary use of the business's assets whenever they like, as some non-transactional, pure-expense part of the business's operation. The vast majority of their assets are soft power — social influence — realized/"invested" by putting people into power in roles in businesses, where those people in power in those roles can then give them perks in return. (And, if they ever need real liquid assets for some reason, then they just make arrangements with other billionaires to 1. start non-profits; 2. get some underemployed accomplices [e.g. relatives] employed at their non-profits in high-paying [but not to the point of being individually highly taxed] roles; and 3. get corporations that owe each billionaire favors, to direct charitable donations to one-another's nonprofits. Then, since this income is entirely the result of cronyism, the accomplices will listen when the billionaire directs them on how to spend their income — and thus the billionaire can spend it as if it were their own income, as they please; usually not on assets, mind you, but rather usually for expenses that personally benefit the billionaire, e.g. things like huge parties or political lobbying. This is the classic "high-society wife" setup, but it can be extended to hundreds of accomplices.)
- coryrc 5y ago
  I don't think you grasp the level of wealth we are talking about. $100B == $3.5M/day over 80 years. Using company property for personal use is a taxable fringe benefit. [0] Maybe you can get a free hotel room under the table but good luck laundering $3.5M/day. >make arrangements with other billionaires to 1. start non-profits Which is why they (and corporations) should not get tax deductions for donating money! [0] i.e. https://www.microsoft.com/en-us/microsoft-365/business-insights-ideas/resources/personal-use-company-vehicle-pucc-tax-rules-reporting https://www.microsoft.com/en-us/microsoft-365/business-insig...
  - derefr 5y ago
    The “average” person who follows these strategies does not have $100B. $5M makes you a Very High Net Worth Individual, and $30M makes you an Ultra High Net Worth Individual, and there are no further categories, because those two points ($5M and $30M) are the points where most — and then all — of these strategies start to make sense. Sure, if you’re one of the fifty people in the world who personally have hundreds of billions in liquid assets, you’ve “escaped” needing to do this sort of thing. But much of the reason that there are so few people who’ve “escaped” this, is that most millionaires don’t aim to just keep getting more liquid assets until they enter this category, because they feel like all the taxation they’d be hit with in the process is “leaving power on the table.” They rather aim to “control” or “leverage” as much money/power as possible at a remove, by minimizing the amount of that that ever personally becomes part of their portfolio. This usually mostly caps their personal net worth (as they’re directing deals to pay into companies they control, rather than ever profiting personally from said deals) but their “social multiplier” on their net worth continues to grow over time. If you’ve ever seen the net-worth curve for some very-obviously-capitalist entrepreneur/VC/investor, and noticed that it plateaus over time — this is what they’re doing. They haven’t quit making money (unless they’ve declared an intent to “switch modes” and spend all their time on spending their money on improving things they care about, like John D. Rockefeller, or Bill Gates.) People who’ve managed to make huge sums of money, tend to love making money; making money is in their blood. They just find, eventually, that making that money personally is no longer a very efficient way of gaining control over ever-larger sums of wealth. > Using company property for personal use is a taxable fringe benefit. Again, the point is to make all “personal use” into business use, by setting up your life so that everything you do is claimable as a business expense by the business, rather than an asset transfer. Sleeping? Managing your hotel. Eating? Managing your restaurant. Getting driven around in a limo? It’s a mobile meeting room where you’re having business meetings! But, to be clear, on the levels that UHNWI people spend money on, these sort of personal expenses aren’t really what I mean by “arranging to control company resources to personal ends.” They’re cute tricks, but they’re not the “big stuff.” The “big stuff” is more like: directing where a corporation will spend its lobbying dollars (business expense), to get petty municipal-planning bills you want passed, so you can have the house you want in the place you want, with the NIMBY rules you want in place (personal end). Or directing a property development company to work with a city to get a certain nascent greenfield area zoned and infrastructure put in (business expense), so that you can then build a house in that area (personal end). Note that in those cases, you don’t gain any asset from the business expense in any legible way. You’re just leveraging your corporate soft power to enable you to do the things you want to do with your own money — to make purchases that would have been impossible, possible. If you’re Jeff Bezos, you can do this out of your own pocket. But most people would find it a lot more efficient to just have those lobbying / property development dollars never go through their bank account.

by coryrc 5y ago

derefr 5y ago

> They'll pay tax on that realized income. And if they build up all that wealth in stock value, then if we don't tax it while they are alive we'll take it when they die, so we'd take away the incentive to hoard all the wealth with those schemes. I don't think you quite understood the scheme here: they never own the PMC. They don't gain the appreciation value of the house or anything like that. It's not an investment to them. They just got someone else to set up the PMC and buy the house, for the positive side-benefits that come from having arranged to assume (at least partial) directorship over that PMC. Maybe it's easier to picture it at larger scale, with an explicit example: say you're a famous property developer who has built a bunch of hotels with your name on them. In one sense, those are businesses for their own sake. But in another sense, those are your vacation homes. You can stay in them, for free, any time you like, which the hotel will likely book as a business expense (hosting one of its directors for an official evaluation of operations on behalf of shareholders.) That business expense will also extend to any perks the hotel offers its ultra-premium clients (often a class only set up in the first place as a way to justify giving directors these perks) — e.g. hotel-employed drivers assigned to pick the billionaire up from the airport, and then attached to them to fetch whatever they need as long as they're there. If you build a bunch of hotels that provide you a free place to stay anywhere you go, then you don't need vacation homes. You never need to buy them, rent them, own them in any sense. They're never realized as income, any more than a "company car" or "company-supplied laptop" that you need to give back when you quit is income. By itself, this would be ridiculous; it'd be like starting a car rental agency just to have a "company car." But, because these are also profitable businesses for their own sake, you can get investors (incl. your own investment businesses) to put money into them, such that you never need to put any of your own (post-tax) money into them. You don't actually even need to personally be a shareholder in the hotel chain, "only" a director of it, to reap these benefits! And, if you're also a person with a lot of connections — someone with a rolodex of reliable CEOs and executives to staff these businesses with — then you never need to worry about actually building or running the business, either. This is how billionaires — or at least, capitalist billionaires — get away with never realizing much income (or even having very many estate-tax-able assets as part of their net worth!) at all. They just cause corporations to invest money in other corporations, never actually touching any of the money or the resulting assets themselves, but rather ending up in arrangements where business expenses of the invested-in corporations are being spent directly on their own happiness, mostly by having temporary use of the business's assets whenever they like, as some non-transactional, pure-expense part of the business's operation. The vast majority of their assets are soft power — social influence — realized/"invested" by putting people into power in roles in businesses, where those people in power in those roles can then give them perks in return. (And, if they ever need real liquid assets for some reason, then they just make arrangements with other billionaires to 1. start non-profits; 2. get some underemployed accomplices [e.g. relatives] employed at their non-profits in high-paying [but not to the point of being individually highly taxed] roles; and 3. get corporations that owe each billionaire favors, to direct charitable donations to one-another's nonprofits. Then, since this income is entirely the result of cronyism, the accomplices will listen when the billionaire directs them on how to spend their income — and thus the billionaire can spend it as if it were their own income, as they please; usually not on assets, mind you, but rather usually for expenses that personally benefit the billionaire, e.g. things like huge parties or political lobbying. This is the classic "high-society wife" setup, but it can be extended to hundreds of accomplices.)

coryrc 5y ago
I don't think you grasp the level of wealth we are talking about. $100B == $3.5M/day over 80 years. Using company property for personal use is a taxable fringe benefit. [0] Maybe you can get a free hotel room under the table but good luck laundering $3.5M/day. >make arrangements with other billionaires to 1. start non-profits Which is why they (and corporations) should not get tax deductions for donating money! [0] i.e. https://www.microsoft.com/en-us/microsoft-365/business-insights-ideas/resources/personal-use-company-vehicle-pucc-tax-rules-reporting https://www.microsoft.com/en-us/microsoft-365/business-insig...
- derefr 5y ago
  The “average” person who follows these strategies does not have $100B. $5M makes you a Very High Net Worth Individual, and $30M makes you an Ultra High Net Worth Individual, and there are no further categories, because those two points ($5M and $30M) are the points where most — and then all — of these strategies start to make sense. Sure, if you’re one of the fifty people in the world who personally have hundreds of billions in liquid assets, you’ve “escaped” needing to do this sort of thing. But much of the reason that there are so few people who’ve “escaped” this, is that most millionaires don’t aim to just keep getting more liquid assets until they enter this category, because they feel like all the taxation they’d be hit with in the process is “leaving power on the table.” They rather aim to “control” or “leverage” as much money/power as possible at a remove, by minimizing the amount of that that ever personally becomes part of their portfolio. This usually mostly caps their personal net worth (as they’re directing deals to pay into companies they control, rather than ever profiting personally from said deals) but their “social multiplier” on their net worth continues to grow over time. If you’ve ever seen the net-worth curve for some very-obviously-capitalist entrepreneur/VC/investor, and noticed that it plateaus over time — this is what they’re doing. They haven’t quit making money (unless they’ve declared an intent to “switch modes” and spend all their time on spending their money on improving things they care about, like John D. Rockefeller, or Bill Gates.) People who’ve managed to make huge sums of money, tend to love making money; making money is in their blood. They just find, eventually, that making that money personally is no longer a very efficient way of gaining control over ever-larger sums of wealth. > Using company property for personal use is a taxable fringe benefit. Again, the point is to make all “personal use” into business use, by setting up your life so that everything you do is claimable as a business expense by the business, rather than an asset transfer. Sleeping? Managing your hotel. Eating? Managing your restaurant. Getting driven around in a limo? It’s a mobile meeting room where you’re having business meetings! But, to be clear, on the levels that UHNWI people spend money on, these sort of personal expenses aren’t really what I mean by “arranging to control company resources to personal ends.” They’re cute tricks, but they’re not the “big stuff.” The “big stuff” is more like: directing where a corporation will spend its lobbying dollars (business expense), to get petty municipal-planning bills you want passed, so you can have the house you want in the place you want, with the NIMBY rules you want in place (personal end). Or directing a property development company to work with a city to get a certain nascent greenfield area zoned and infrastructure put in (business expense), so that you can then build a house in that area (personal end). Note that in those cases, you don’t gain any asset from the business expense in any legible way. You’re just leveraging your corporate soft power to enable you to do the things you want to do with your own money — to make purchases that would have been impossible, possible. If you’re Jeff Bezos, you can do this out of your own pocket. But most people would find it a lot more efficient to just have those lobbying / property development dollars never go through their bank account.