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I decided to "pay off personal taxes" >Here's where we get into the dicey business of what "personal worth" is, and how that translates to taxable income. >An

I decided to "pay off personal taxes" >Here's where we get into the dicey business of what "personal worth" is, and how that translates to taxable income. >Answer: It usually doesn't, because rich people are master frauds and charlatans who exploit loopholes in tax code to avoid paying their fair share. >Jeff Bezos is worth $156 billion? You're using the top tax bracket of 37% and paying out $57.72 billion of that. You'd pay 99%, but then this would be a very short simulator. That's not how it really works, right? He's supposed to pay tax on income not on wealth.

throwoutway 5y ago
You’re right. That’s not how it works because these are paper gains of capital (stock, which capital gains tax applies to) rather than income (W2).
Swizec 5y ago
> He's supposed to pay tax on income not on wealth. Yes. That’s the trap most of these arguments for taxing the rich fall into under the current system. Having money and making money are taxed differently. If you own a house and all of your neighbors sell theirs at a 30% markup, should you pay taxes on making $300,000 (for a 1mil house) this year? Maybe … seems kinda unfair though. You didn’t participate in those transactions and made no money to pay the new taxes with. Should wealth be capped? Dunno, maybe. It would solve a lot of problems and yet feels a bit draconian. Should wealth be repatriated by the state? Eh no let’s not go there. Large swathes of Europe tried that in the past and it’s still causing problems. Should “rich people” be taxed? Yeah definitely. The hard part is defining what exactly gets taxed and how. Making people sell their assets to pay taxes on those assets seems kinda weird to me.
- triceratops 5y ago
  > If you own a house and all of your neighbors sell theirs at a 30% markup, should you pay taxes on making $300,000 (for a 1mil house) this year? In most places (not California) your property will likely be assessed higher and your taxes will be commensurately higher next year. Your house's increased value isn't treated like realized income, but its effect on your taxes isn't 0 either.
  - deleted 5y ago
    [deleted]
  - dragonwriter 5y ago
    > In most places (not California) your property will likely be assessed higher In California it will be assessed higher, there is just a cap in the rate of increase (lots of places have copied this though none in the US have as low a cap as California’s “lower of 2% or rate of general inflation”, and few combine their cap on increases with as low a cap on nominal property tax rates [1%] as California.)
  - Swizec 5y ago
    > Your house's increased value isn't treated like realized income, but its effect on your taxes isn't 0 either. Yes true. My point is articles about “tax the rich” prey on people not understanding this. The narrative is that “X rich person made billions and didn’t pay the same 30% tax as you!” … no they didn’t make anything. The value of their assets went up. They might even have negative cashflow to sustain that.
    - triceratops 5y ago
      "Tax the rich" people get the details wrong, but I understand where they're coming from. For most people with a consequential net worth, that net worth is tied up in their primary residence. If its value goes up, they pay higher taxes. Even if a rental property's assessed value goes up, rent goes up. This doesn't really apply to the ultra-rich. Unless they're real-estate billionaires, and even then I'm sure they have better tax strategies than regular people.
- ItsMonkk 5y ago
  The wealth tax is a bad tax, but it's trying to fix a bad monetary system. When the Fed only cares about inflation and doesn't care at all about wealth inequality effect of lowered velocity, you get exactly what you incentivize. The Fed lowers interest rates. The wealthy take out loans. The wealthy buy assets with the money from those loans. The values of assets goes up. As the wealthy assets are now up, they are free to take out another loan... as all new money was just piled into markets and isn't consumed the velocity goes down, and therefore the inflation rate goes down. As the inflation rate went down... the Fed lowers interest rates. The true way to solve this issue is by having a constant velocity of the money supply. If you don't give Congress the tools to fix the monetary system, their only option is a hack.
belval 5y ago
This is just another piece written by someone who does not understand how income tax works and is unable to appreciate that this problem is actually complicated. If Jeff Bezos net worth increases by 1 billion over a year, he hasn't realized any of the actual gains and that profit it purely on paper. If he chose to live on 1M$/year then he only has to pay 370k$ in taxes that's how it works for you and me and that's how it works for him. Does it make sense that he paid 0$ in taxes and bought a 300M$ yacht? Absolutely not and we should find ways to close that loophole. Does it mean that we should tax wealth? Absolutely not.
- hncurious 5y ago
  People also seem to have forgotten that stock can, and often does, go down.
- coldpie 5y ago
  > Does it mean that we should tax wealth? Absolutely not. I'm not so sure. Maybe we should. Wealth hording is a real issue. I'm at least open to the idea. I agree with the rest of your comment.
  - lapetitejort 5y ago
    Taxing wealth acts as an incentive to spread the shares around the company instead of hoarding them. Don't want your wealth taxed? Let the workers enjoy the fruits of their labor. The same goes for ~90% brackets. Don't want your salary to be taxed at such a high rate? Put that money into R&D or worker's paychecks.
    - joshribakoff 5y ago
      The (capitalist) counter argument is that forcing people to spread wealth acts as an incentive not to innovate
    - deelowe 5y ago
      This only applies in the very limited scenario where you personally own the shares. What's to stop someone from setting up a trust, shell company or similar and then giving them all of the "wealth" while maintaining a controlling interest? From there, the individual simply extracts what they need when they need to. We're basically back to the original scenario only with more steps added in between. I assume there isn't going to be an argument against companies "hording wealth."
SllX 5y ago
You are correct. Much of his personal wealth is equity in his companies, primarily Amazon. That’s tied up in Amazon’s business, not a piggy bank, and leaving that money in Amazon does leave it subject to rises and falls in the market valuation of Amazon. Realizing those gains from his initial investment and any subsequent personal investments in Amazon, or cashing out means selling on the market; and the act of selling on the market has an effect on the selling price on the market, particularly the bigger the sale. Jeff Bezos has never earned $156B in income in his life, but on paper he could by selling everything he owns. On paper at least.
- edge17 5y ago
  Not really without moving the price of the stock. You can try it yourself by trading some illiquid securities. It goes with anything you trade - if you trade enough you move the price. It's also not working capital, it's just a personal asset - albeit unrealized gains. Taxing unrealized gains is like you paying taxes for an increase in value in the house you purchased. Until you sell the house, you may not have the money to even pay it.
  - SllX 5y ago
    We are mostly not disagreeing. On paper does not necessarily reflect what would happen in reality if he tried to sell that much Amazon stock quickly. You did raise a good point on equity vs working capital though, and I’m still inside the edit window so I’m going to adjust that now. Thanks!
eps 5y ago
> He's supposed to pay tax on income not on wealth. Depends on the country. In the US, it's just on income. In Switzerland, for example, it's also on wealth. Well under a single percent, but still.

throwoutway 5y ago

You’re right. That’s not how it works because these are paper gains of capital (stock, which capital gains tax applies to) rather than income (W2).

Swizec 5y ago

> He's supposed to pay tax on income not on wealth. Yes. That’s the trap most of these arguments for taxing the rich fall into under the current system. Having money and making money are taxed differently. If you own a house and all of your neighbors sell theirs at a 30% markup, should you pay taxes on making $300,000 (for a 1mil house) this year? Maybe … seems kinda unfair though. You didn’t participate in those transactions and made no money to pay the new taxes with. Should wealth be capped? Dunno, maybe. It would solve a lot of problems and yet feels a bit draconian. Should wealth be repatriated by the state? Eh no let’s not go there. Large swathes of Europe tried that in the past and it’s still causing problems. Should “rich people” be taxed? Yeah definitely. The hard part is defining what exactly gets taxed and how. Making people sell their assets to pay taxes on those assets seems kinda weird to me.

triceratops 5y ago
> If you own a house and all of your neighbors sell theirs at a 30% markup, should you pay taxes on making $300,000 (for a 1mil house) this year? In most places (not California) your property will likely be assessed higher and your taxes will be commensurately higher next year. Your house's increased value isn't treated like realized income, but its effect on your taxes isn't 0 either.
- deleted 5y ago
  [deleted]
- dragonwriter 5y ago
  > In most places (not California) your property will likely be assessed higher In California it will be assessed higher, there is just a cap in the rate of increase (lots of places have copied this though none in the US have as low a cap as California’s “lower of 2% or rate of general inflation”, and few combine their cap on increases with as low a cap on nominal property tax rates [1%] as California.)
- Swizec 5y ago
  > Your house's increased value isn't treated like realized income, but its effect on your taxes isn't 0 either. Yes true. My point is articles about “tax the rich” prey on people not understanding this. The narrative is that “X rich person made billions and didn’t pay the same 30% tax as you!” … no they didn’t make anything. The value of their assets went up. They might even have negative cashflow to sustain that.
  - triceratops 5y ago
    "Tax the rich" people get the details wrong, but I understand where they're coming from. For most people with a consequential net worth, that net worth is tied up in their primary residence. If its value goes up, they pay higher taxes. Even if a rental property's assessed value goes up, rent goes up. This doesn't really apply to the ultra-rich. Unless they're real-estate billionaires, and even then I'm sure they have better tax strategies than regular people.
ItsMonkk 5y ago
The wealth tax is a bad tax, but it's trying to fix a bad monetary system. When the Fed only cares about inflation and doesn't care at all about wealth inequality effect of lowered velocity, you get exactly what you incentivize. The Fed lowers interest rates. The wealthy take out loans. The wealthy buy assets with the money from those loans. The values of assets goes up. As the wealthy assets are now up, they are free to take out another loan... as all new money was just piled into markets and isn't consumed the velocity goes down, and therefore the inflation rate goes down. As the inflation rate went down... the Fed lowers interest rates. The true way to solve this issue is by having a constant velocity of the money supply. If you don't give Congress the tools to fix the monetary system, their only option is a hack.

belval 5y ago

This is just another piece written by someone who does not understand how income tax works and is unable to appreciate that this problem is actually complicated. If Jeff Bezos net worth increases by 1 billion over a year, he hasn't realized any of the actual gains and that profit it purely on paper. If he chose to live on 1M$/year then he only has to pay 370k$ in taxes that's how it works for you and me and that's how it works for him. Does it make sense that he paid 0$ in taxes and bought a 300M$ yacht? Absolutely not and we should find ways to close that loophole. Does it mean that we should tax wealth? Absolutely not.

hncurious 5y ago
People also seem to have forgotten that stock can, and often does, go down.
coldpie 5y ago
> Does it mean that we should tax wealth? Absolutely not. I'm not so sure. Maybe we should. Wealth hording is a real issue. I'm at least open to the idea. I agree with the rest of your comment.
- lapetitejort 5y ago
  Taxing wealth acts as an incentive to spread the shares around the company instead of hoarding them. Don't want your wealth taxed? Let the workers enjoy the fruits of their labor. The same goes for ~90% brackets. Don't want your salary to be taxed at such a high rate? Put that money into R&D or worker's paychecks.
  - joshribakoff 5y ago
    The (capitalist) counter argument is that forcing people to spread wealth acts as an incentive not to innovate
  - deelowe 5y ago
    This only applies in the very limited scenario where you personally own the shares. What's to stop someone from setting up a trust, shell company or similar and then giving them all of the "wealth" while maintaining a controlling interest? From there, the individual simply extracts what they need when they need to. We're basically back to the original scenario only with more steps added in between. I assume there isn't going to be an argument against companies "hording wealth."

SllX 5y ago

You are correct. Much of his personal wealth is equity in his companies, primarily Amazon. That’s tied up in Amazon’s business, not a piggy bank, and leaving that money in Amazon does leave it subject to rises and falls in the market valuation of Amazon. Realizing those gains from his initial investment and any subsequent personal investments in Amazon, or cashing out means selling on the market; and the act of selling on the market has an effect on the selling price on the market, particularly the bigger the sale. Jeff Bezos has never earned $156B in income in his life, but on paper he could by selling everything he owns. On paper at least.

edge17 5y ago
Not really without moving the price of the stock. You can try it yourself by trading some illiquid securities. It goes with anything you trade - if you trade enough you move the price. It's also not working capital, it's just a personal asset - albeit unrealized gains. Taxing unrealized gains is like you paying taxes for an increase in value in the house you purchased. Until you sell the house, you may not have the money to even pay it.
- SllX 5y ago
  We are mostly not disagreeing. On paper does not necessarily reflect what would happen in reality if he tried to sell that much Amazon stock quickly. You did raise a good point on equity vs working capital though, and I’m still inside the edit window so I’m going to adjust that now. Thanks!

eps 5y ago

> He's supposed to pay tax on income not on wealth. Depends on the country. In the US, it's just on income. In Switzerland, for example, it's also on wealth. Well under a single percent, but still.