5 ms·

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

by 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."
    - coldpie 5y ago
      > I assume there isn't going to be an argument against companies "hording wealth." Mm, I dunno. Why not? Maybe Apple shouldn't be sitting on a massive pile of cash which could be put to some useful purpose.
      - Isinlor 5y ago
        A company owns a nuclear plant. Are they hording wealth? "Facebook the company" owns "Facebook the website". Are they hording wealth? Alphabet own the Google trade mark. Are they hording wealth? My and my colleagues decided to make a joke cryptocurrency that nobody is using. Elon Musk want to buy our company for 10 billion $, but we don't want to sell. Are we hoarding wealth?
      - deelowe 5y ago
        Because business continuity is an important aspect of running a business. Who's to say what is hording and what is simply risk management?
    - aoeusnth1 5y ago
      Is it possible to either tax the individual for owning a controlling interest, or tax the trust directly as an individual?
    - unethical_ban 5y ago
      Perhaps a law that no entity can own more than X% of a company, and outlaw hedge funds? Thinking out loud here. I wouldn't snap my finger to make it happen, but I think it's fair for the layman to questions the status quo "why do organizations exist that allow small groups of people to play the game of timing arbitrage on the market to amass billions of dollars".
- dtnewman 5y ago
  In an ideal world, maybe. Problem is that measuring wealth is a very tough game. Let's imagine you start a company. Things are going really well and you raise tons of venture money at higher and higher valuations. In your most recent raise, you raised $1 billion at a $10B valuation and as founder of the company and owner of 20%, you are now worth (on paper), $2 billion. But this is all based on venture valuations, not what's in your bank account. Now say we tax wealth... how do we decide what you are worth? Maybe it's $2 billion, but you have common, not preferred shares. And in any case, you may not be able to sell shares to pay those taxes because it's not a public company. In any case, billionaires will find ways to say they are worth less. They'll buy paintings and then argue that they overpaid. They'll buy cars and yachts and claim depreciations in value. They'll invest in Romanian forests and other hard to value assets. It'll never work in practice. That's why almost no one taxes wealth and almost everyone taxes capital gains instead.
- takinola 5y ago
  What exactly is "wealth hoarding" and why is it a problem? I keep hearing this term and realize I just tune it out because it sounds like a political slogan. I am open to understanding though just in case this is a blindspot for me.
  - coldpie 5y ago
    Numbers are all super ballparky, but the top 10% of US citizens hold about $60 trillion in wealth[1]. If you redistributed that to every American equally, that would put about $200,000 into each person's bank account[2]. I think that would do a lot to alleviate things like college debt, credit card debt, and all the myriad woes that come with poverty, all without printing a single dollar. (Yes it's a complicated problem, you can't liquidate wealth like that, and obviously dropping two hundred K into everyone's bank account would probably create some weird issues. But that's a high-level overview of the problem.) [1] https://en.wikipedia.org/wiki/File:US_Wealth_Inequality_-_v2.png https://en.wikipedia.org/wiki/File:US_Wealth_Inequality_-_v2... [2] $60,000,000,000,000 / 300,000,000 people == $200,000 per person.
    - takinola 5y ago
      I guess the question is whether the wealth of the top 10% is related to the issues of the rest. There are a number of possible places to get the same money (budget reallocations, corporate wealth, etc). It is not obvious to me that these 2 things are connected. Also, one way to address the issues is to get everyone to be wealthier. "Why can't you just be richer?" seems like a weird thing to say but this is exactly what has happened over the last 100 years or so (at least for most of the world's population). This has solved many things that used to be problems but created new problems of its own. Would a solution that makes the bottom 90% better able to afford healthcare but makes the top 10% even richer be a good thing? If not, why not?
    - stephen999 5y ago
      Just distributing more money to people doesn’t create more resources in the real world. It just makes those resources cost more in dollar terms because more people have more money to spend on it. But the dollar value is somewhat arbitrary, doesn’t matter if it’s higher or lower just the ratio to incomes.
noja 5y ago
> Does it mean that we should tax wealth? Absolutely not. If he takes out a loan guaranteed by his wealth, how should that be taxed?
- lovecg 5y ago
  By taxing the income he has to generate to pay off the loan. And yes, we should close the intergenerational loopholes. Also, this is not as huge an issue as it was made out to be. Check out the actual income and taxes paid by some of the billionaires. It’s not clear why they would need to do the infinite loan trick on top of that.
- belval 5y ago
  I don't claim to have all the answers, I'm just a software developer. For what it's worth, Jeff Bezos should pay taxes that match his lifestyle I 100% agree, but saying "he has 136B$ in the bank and we should tax that amount" is making several leaps in logic that I can't get behind.
  - MrPatan 5y ago
    Bezos doesn't pay VAT and sales tax on the stuff he buys to have his lifestyle? What's the loophole there?
devoutsalsa 5y ago
The wealthy borrow against their assets at stupid low interest rates, and those loans are not subject to income tax. Got a billion dollars in stock? Borrow as much as you need to pay for that yacht.
- deleted 5y ago
  [deleted]
- missedthecue 5y ago
  eventually you have to sell the stock to pay off the loan(s), triggering a tax event. If you wait until death, you get walloped by the estate tax, which is even higher than income tax.
  - devoutsalsa 5y ago
    Wait until you hear about inherited stock... https://www.investopedia.com/terms/i/inherited-stock.asp https://www.investopedia.com/terms/i/inherited-stock.asp Say the stock you borrow against was purchased at $10, and is now worth $100. That's a $90 increase. You get hit by a bus and die. The stocks cost for tax purposes is increased to $100 for the heirs, meaning that $90 increase is not taxed as a gain (not sure about how it's tax as inheritance).
    - missedthecue 5y ago
      The cost basis resets, so say it goes from $100 to $110, the inheritor will only pay taxes on $10 of gains. But that doesn't prevent inheritance tax, which on a billion dollar fortune will exceed 50%. Even more if you die in places like NY or CA.
dgb23 5y ago
Related: https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
iamricks 5y ago
Doesn't the 300M he spent on the yacht get distributed into the economy? I don't understand why people want higher taxes on high income, i don't want the government to distribute that money. I rather it get distributed to the company and its employees building that yacht than adding it to the national budget.
- unethical_ban 5y ago
  The principle is simple: There are baseline needs in our society currently not met for a large number of people, and it is the responsibility of government to provide that baseline (food, water, shelter, basic healthcare). Beyond that, we should incentivize people to work in some fashion to be a contributing member of society. Second and somewhat unrelated: The inequality gap is growing, shows no signs of shrinking meaningfully. The means of production are becoming more and more automated, so the owners will accumulate even more wealth while millions more lose their jobs and sources of social security. Thus, the government should ensure that the owners of the means of production are taxed to extract that accumulation and provide for the people.
  - FredPret 5y ago
    > “and it is the responsibility of government to provide that baseline” >“ The inequality gap is growing, shows no signs of shrinking meaningfully. ” You’re applying your moral model of the world universally. In reality, not everyone sees it this way.
    - unethical_ban 5y ago
      The first quote is philosophy. The second quote is fact. Welcome to the world. Everyone applies their moral model to the world. If you claim you don't, then you are applying your moral model of "members of society have no obligation to help those who are inherently damaged by society" to the world.
      - FredPret 5y ago
ldbooth 5y ago
Buffet has argued for a Consumption tax, he is closest to the mark.
- hackflip 5y ago
  Is that not what sales tax is?
  - ldbooth 5y ago
    Good question. I suppose the consumption tax would be higher for luxury items, and non existent for groceries, rather than a flat tax across the board. Also sales tax is at the state level and suppose this would be federal. I think of yachts and 3rd homes being taxed a lot higher.
misiti3780 5y ago
You are usually required to pay taxes when you buy high price items. Sales tax, etc. In NYC, if you buy a condo that is worth more than 1MM, you have to pay a "mansion tax". etc

by belval 5y ago

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."
  - coldpie 5y ago
    > I assume there isn't going to be an argument against companies "hording wealth." Mm, I dunno. Why not? Maybe Apple shouldn't be sitting on a massive pile of cash which could be put to some useful purpose.
    - Isinlor 5y ago
      A company owns a nuclear plant. Are they hording wealth? "Facebook the company" owns "Facebook the website". Are they hording wealth? Alphabet own the Google trade mark. Are they hording wealth? My and my colleagues decided to make a joke cryptocurrency that nobody is using. Elon Musk want to buy our company for 10 billion $, but we don't want to sell. Are we hoarding wealth?
    - deelowe 5y ago
      Because business continuity is an important aspect of running a business. Who's to say what is hording and what is simply risk management?
  - aoeusnth1 5y ago
    Is it possible to either tax the individual for owning a controlling interest, or tax the trust directly as an individual?
  - unethical_ban 5y ago
    Perhaps a law that no entity can own more than X% of a company, and outlaw hedge funds? Thinking out loud here. I wouldn't snap my finger to make it happen, but I think it's fair for the layman to questions the status quo "why do organizations exist that allow small groups of people to play the game of timing arbitrage on the market to amass billions of dollars".
dtnewman 5y ago
In an ideal world, maybe. Problem is that measuring wealth is a very tough game. Let's imagine you start a company. Things are going really well and you raise tons of venture money at higher and higher valuations. In your most recent raise, you raised $1 billion at a $10B valuation and as founder of the company and owner of 20%, you are now worth (on paper), $2 billion. But this is all based on venture valuations, not what's in your bank account. Now say we tax wealth... how do we decide what you are worth? Maybe it's $2 billion, but you have common, not preferred shares. And in any case, you may not be able to sell shares to pay those taxes because it's not a public company. In any case, billionaires will find ways to say they are worth less. They'll buy paintings and then argue that they overpaid. They'll buy cars and yachts and claim depreciations in value. They'll invest in Romanian forests and other hard to value assets. It'll never work in practice. That's why almost no one taxes wealth and almost everyone taxes capital gains instead.
takinola 5y ago
What exactly is "wealth hoarding" and why is it a problem? I keep hearing this term and realize I just tune it out because it sounds like a political slogan. I am open to understanding though just in case this is a blindspot for me.
- coldpie 5y ago
  Numbers are all super ballparky, but the top 10% of US citizens hold about $60 trillion in wealth[1]. If you redistributed that to every American equally, that would put about $200,000 into each person's bank account[2]. I think that would do a lot to alleviate things like college debt, credit card debt, and all the myriad woes that come with poverty, all without printing a single dollar. (Yes it's a complicated problem, you can't liquidate wealth like that, and obviously dropping two hundred K into everyone's bank account would probably create some weird issues. But that's a high-level overview of the problem.) [1] https://en.wikipedia.org/wiki/File:US_Wealth_Inequality_-_v2.png https://en.wikipedia.org/wiki/File:US_Wealth_Inequality_-_v2... [2] $60,000,000,000,000 / 300,000,000 people == $200,000 per person.
  - takinola 5y ago
    I guess the question is whether the wealth of the top 10% is related to the issues of the rest. There are a number of possible places to get the same money (budget reallocations, corporate wealth, etc). It is not obvious to me that these 2 things are connected. Also, one way to address the issues is to get everyone to be wealthier. "Why can't you just be richer?" seems like a weird thing to say but this is exactly what has happened over the last 100 years or so (at least for most of the world's population). This has solved many things that used to be problems but created new problems of its own. Would a solution that makes the bottom 90% better able to afford healthcare but makes the top 10% even richer be a good thing? If not, why not?
  - stephen999 5y ago
    Just distributing more money to people doesn’t create more resources in the real world. It just makes those resources cost more in dollar terms because more people have more money to spend on it. But the dollar value is somewhat arbitrary, doesn’t matter if it’s higher or lower just the ratio to incomes.

noja 5y ago

> Does it mean that we should tax wealth? Absolutely not. If he takes out a loan guaranteed by his wealth, how should that be taxed?

lovecg 5y ago
By taxing the income he has to generate to pay off the loan. And yes, we should close the intergenerational loopholes. Also, this is not as huge an issue as it was made out to be. Check out the actual income and taxes paid by some of the billionaires. It’s not clear why they would need to do the infinite loan trick on top of that.
belval 5y ago
I don't claim to have all the answers, I'm just a software developer. For what it's worth, Jeff Bezos should pay taxes that match his lifestyle I 100% agree, but saying "he has 136B$ in the bank and we should tax that amount" is making several leaps in logic that I can't get behind.
- MrPatan 5y ago
  Bezos doesn't pay VAT and sales tax on the stuff he buys to have his lifestyle? What's the loophole there?

devoutsalsa 5y ago

The wealthy borrow against their assets at stupid low interest rates, and those loans are not subject to income tax. Got a billion dollars in stock? Borrow as much as you need to pay for that yacht.

deleted 5y ago
[deleted]
missedthecue 5y ago
eventually you have to sell the stock to pay off the loan(s), triggering a tax event. If you wait until death, you get walloped by the estate tax, which is even higher than income tax.
- devoutsalsa 5y ago
  Wait until you hear about inherited stock... https://www.investopedia.com/terms/i/inherited-stock.asp https://www.investopedia.com/terms/i/inherited-stock.asp Say the stock you borrow against was purchased at $10, and is now worth $100. That's a $90 increase. You get hit by a bus and die. The stocks cost for tax purposes is increased to $100 for the heirs, meaning that $90 increase is not taxed as a gain (not sure about how it's tax as inheritance).
  - missedthecue 5y ago
    The cost basis resets, so say it goes from $100 to $110, the inheritor will only pay taxes on $10 of gains. But that doesn't prevent inheritance tax, which on a billion dollar fortune will exceed 50%. Even more if you die in places like NY or CA.

dgb23 5y ago

Related: https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...

iamricks 5y ago

Doesn't the 300M he spent on the yacht get distributed into the economy? I don't understand why people want higher taxes on high income, i don't want the government to distribute that money. I rather it get distributed to the company and its employees building that yacht than adding it to the national budget.

unethical_ban 5y ago
The principle is simple: There are baseline needs in our society currently not met for a large number of people, and it is the responsibility of government to provide that baseline (food, water, shelter, basic healthcare). Beyond that, we should incentivize people to work in some fashion to be a contributing member of society. Second and somewhat unrelated: The inequality gap is growing, shows no signs of shrinking meaningfully. The means of production are becoming more and more automated, so the owners will accumulate even more wealth while millions more lose their jobs and sources of social security. Thus, the government should ensure that the owners of the means of production are taxed to extract that accumulation and provide for the people.
- FredPret 5y ago
  > “and it is the responsibility of government to provide that baseline” >“ The inequality gap is growing, shows no signs of shrinking meaningfully. ” You’re applying your moral model of the world universally. In reality, not everyone sees it this way.
  - unethical_ban 5y ago
    The first quote is philosophy. The second quote is fact. Welcome to the world. Everyone applies their moral model to the world. If you claim you don't, then you are applying your moral model of "members of society have no obligation to help those who are inherently damaged by society" to the world.
    - FredPret 5y ago

ldbooth 5y ago

Buffet has argued for a Consumption tax, he is closest to the mark.

hackflip 5y ago
Is that not what sales tax is?
- ldbooth 5y ago
  Good question. I suppose the consumption tax would be higher for luxury items, and non existent for groceries, rather than a flat tax across the board. Also sales tax is at the state level and suppose this would be federal. I think of yachts and 3rd homes being taxed a lot higher.

misiti3780 5y ago

You are usually required to pay taxes when you buy high price items. Sales tax, etc. In NYC, if you buy a condo that is worth more than 1MM, you have to pay a "mansion tax". etc