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The current tax situation is like property taxes in California before Prop 19: nobody sells, so ownership and control never changes. This facilitates wealth tra

The current tax situation is like property taxes in California before Prop 19: nobody sells, so ownership and control never changes. This facilitates wealth transfer from generation to generation (in the equity case, though the use of trusts) and perpetuates wealth inequality.

xbar 5y ago
This is the kind of myopic reading of the law that will curtail entrepreneurial endeavors and lead to corporate-only wealth.
- threeseed 5y ago
  I fail to see how. Entrepeneurs aren't going to not build a company because of some specific tax treatment that only applies whilst they are wildly successful.
  - WalterBright 5y ago
    Taking away the money, though, will cripple their ability to grow the companies. No SpaceX, no Tesla, no iPhone, etc.
    - chollida1 5y ago
      We’ll when musk started both those companies he wouldn’t be affected by this tax. In fact it wouldn’t have hit him until a few years ago and he hasn’t given either company money in longer than that. And Steve jobs did t inject money into apple when they were creating the iPhone. So you’re entire point has been pretty much invalidated
      - WalterBright 5y ago
        Jobs put most of his fortune from Apple into developing Pixar, transforming it from a failure into a powerhouse. The rest went into Next, which formed the core(!) of Apple's resurgence when Apple merged with it. No Jobs money => no Pixar => no Next => no iPhone Neener neener!
      - hedora 5y ago
        Musk currently has a controlling interest in Tesla because of his stock holdings. Under the proposal, he would no longer have the holdings, and thus no longer control the company.
    - ameetgaitonde 5y ago
      A tax on personal unrealized capital gains will not take away any money from the company. It's privately-held, and has no effect on a company's balance sheet.
      - WalterBright 5y ago
        > no effect on a company's balance sheet Selling masses of stock to pay the tax will push the value of the stock down. That has a large effect on the company's ability to raise capital. As for the entrepreneur, he'll have much less capital to invest. It's a fantasy that one can extract endless billions from a company and its investors without consequences.
    - mikem170 5y ago
      I don't follow your reasoning, either. Do you really think that a new tax on several hundred billionaires will discourage the hundreds of thousands of entrepreneurs that are out there, that a significant amount of them will not bother since they can only make a few hundred million before they have an extra 15% of their money collected in taxes? Most entrepreneurs would be overjoyed to be a billionaire and have to pay that extra 15%. Seems like they'd be the lucky ones. Seems like a billionaire or an aspiring billionaire complaining about such a thing would be pretty weird. The parent you replied to mentioned wealth being locked up to avoid capital gains taxes. There are other pros and cons, I'm sure. Do you think this new tax on billionaires means that less people will be trying to become multi-millionaires? Note that I'm not happy with the current tax system, and this seems like another kludge. I also don't know that we need to coddle or incentivize wealth maintenance, it's not an end in and of itself.
      - WalterBright 5y ago
        Extracting the money from them will mean less investment. It's simple mathematics. You take away a billion from an investor, then a billion is not invested. Even worse, you're taking the money away from the most effective investors.
        xbar 5y ago
        Exactly this. And even worse, you are disincentivizing the most effective leaders from driving their companies to huge success. It eliminates the risk to established entities to be disrupted.
        mikem170 5y ago
        Maybe that's the part I'm confused about. Aren't they talking about taxing unrealized capital gains, i.e. money that is being left locked up in a single stock, in order to avoid being taxed when it is moved? Wouldn't one of the effects of this tax be to incentive these effective/successful billionaires into moving their money into new investments, instead of being left parked in their already successful investment? And most entrepreneurs are not, nor will never be, billionaires who are subject to this extra tax. That being the case I wouldn't think that this will put a dent in overall entrepreneurship. It might have the opposite effect, where there are numerically more entrepreneurs making capital allocation decisions, which might be better for society than having fewer people (billionaires) controlling an ever increasing amount of capital. I grant that tax changes like this have numerous conflicting effects, sometimes unpredictable. Perhaps their will be another art bubble... I don't think that it's a good thing that we structure our society for the convenience of those who can amass money. I'm definitely not fond of kludgy taxes like this one, but I also don't understand why so many jump to the defense of so few billionaires.
hellbannedguy 5y ago
You mean old middle class, and poor homeowners, can stay in the house they raised a family in? The only reason my high school educated 80 years old mother in declining health can stay in a home, and county, she feels somewhat safe is because of prop 13. Her biannual property taxes are still a big deal when they arrive. I've said this before, but I'm beginning to think if you didn't live through the craziness before Prop 13, you won't ever quite get it. Prop 13 has been the only blessing most homeowners have been given. If you want to put income limits on the gift of prop 13 fine, but doing away with it completely would be evil. By income limits I mean the guy making $600,000/year, and a huge bank account, could probally still survive without prop 13 protection. The 80 year old lady, or man, surviving on 1/2 widower's blue collar pension is another story. (I'm for means testing on all programs. I'm also for tieing all societal fees/fines---speeding tickets, registration, patent fees, etc. to 1040 income/assets wealth.)
- Msw242 5y ago
  Prop 13 disincentivizes building housing. Stop calling people evil just because your grandmother isn't the center of their policy concerns.
  - rsj_hn 5y ago
    > Prop 13 disincentivizes building housing. I didn't think we reached the point where people are arguing that things that make housing more valuable disincentivize building more homes - but here we are. It is zoning restrictions, EIR, etc., that disincentivize housing.
    - Msw242 5y ago
      Prop 13 absolutely disincentivizes building housing. Other policies can also be bad. But grandma's house isn't being bulldozed to make way for a quadplex because she's insulated from the market. https://www.kqed.org/news/11700683/too-few-homes-is-proposition-13-to-blame-for-californias-housing-shortage https://www.kqed.org/news/11700683/too-few-homes-is-proposit... But if you own a home in California, you are incentivized to maintain prop 13. It's funny how hard it is for people to understand something when it cuts against their personal interests.
jimbob45 5y ago
Generational wealth transfer is a good thing. It's the main reason most people work hard in life - to provide a better life for their offspring. Wealth inequality is a good thing too. People who work harder necessarily live better lives. If you want to start stealing their hard work to give to the lazy, you're going to find that the hard-working flee the country à la the USSR.
- elliekelly 5y ago
  > It's the main reason most people work hard in life - to provide a better life for their offspring. Do you believe people without children have no motivation to work hard?
- bskrobisz 5y ago
  I think the primary issue is not precisely 'wealth inequality' but rather a lack of accountability and responsibility from people with large amounts of wealth. If one has assets whose value is representative of the life's work of several thousand people, it's one thing to have someone who is demonstrably capable and responsible manage it, and another thing entirely to have someone /own/ it. If I had to guess (and I clearly am) a larger proportion of people are upset with the latter than the former. Nothing is stopping someone from employing their wealth to build a yacht, fifteen McMansions, and a thirty-foot solid-gold Mothman statue just after getting off of a six-month prison stint for a billion dollars of ecological damage (all purely hypothetical but I would assert entirely plausible); that people exist with the right to exchange a colossal amount of wealth to be allowed to waste an equally colossal amount of actual effort and resources is the problem. I won't say nobody has an issue with individual people being allowed to direct huge amounts of funding, but I would assert that more people recognize that extravagant waste for the purpose of status should not be scaled to the extant degree of wealth disparity.
  - WalterBright 5y ago
    If you own your house, is it unfair that you don't share it with all the people who contributed to building it? Or is it fair that you paid them what they asked for their efforts?
dcolkitt 5y ago
Except there’s a 40% estate tax still levied at each generation. Plus unlike European aristocracy, American plutocrats rarely intermarry. Even if you’re only reproducing at replacement, your wealth gets diluted by 50% each generation. Stack the two and you’re getting slashed by 80% every generation. Don’t take my word for it. How many fourth generational heirs do we see among America’s wealthiest billionaires? Essentially zero.
- deleted 5y ago
  [deleted]
- movedx 5y ago
  There are ways around this in the UK system, however. It's probably the same case in the US. The short of it is you transfer the wealth well before (15-20 years) the death occurs, thus there is no inheritance. This was used recently by an MP. That being said I agree with your thoughts, however: > How many fourth generational heirs do we see among America’s wealthiest billionaires? Essentially zero. This is probably true but I'd like to ask the question: how many of them simply inherit a lot of money without any of the fame associated with it, and just go unnoticed? I've met such a person, actually. EDIT: https://www.bbc.com/news/business-36009963 https://www.bbc.com/news/business-36009963 - this is what I was thinking about.
  - dragonwriter 5y ago
    > There are ways around this in the UK system, however. It's probably the same case in the US. The short of it is you transfer the wealth well before (15-20 years) the death occurs, thus there is no inheritance. So, you pay gift taxes instead. Unless you use fake business transactions.
- mywittyname 5y ago
  > How many fourth generational heirs do we see among America’s wealthiest billionaires? Essentially zero. Quite a few. Not sure how long you would make four generations, but let's say 100 years. There are the obvious famous families; Ford, Rockafellers, Du Pont, Mellon, Mars, Hearst, SC Johnson ("a family company"), etc. But there are a number of billionaire families that aren't recognized much outside of their "home towns" because they started mundane things like retail stores or own mineral rights. That's not even getting into families whose wealth has diluted, but whose descendents are politicians, actors, or otherwise notable / influential people. Granted, most billion dollar businesses are <4 generations old, but more sophisticated investment vehicles exists for preserving wealth than existed even 50 years ago.
jldugger 5y ago
> This facilitates wealth transfer from generation to generation Well, arguably it's the step up in basis that enables generational transfer without taxation.

xbar 5y ago

This is the kind of myopic reading of the law that will curtail entrepreneurial endeavors and lead to corporate-only wealth.

threeseed 5y ago
I fail to see how. Entrepeneurs aren't going to not build a company because of some specific tax treatment that only applies whilst they are wildly successful.
- WalterBright 5y ago
  Taking away the money, though, will cripple their ability to grow the companies. No SpaceX, no Tesla, no iPhone, etc.
  - chollida1 5y ago
    We’ll when musk started both those companies he wouldn’t be affected by this tax. In fact it wouldn’t have hit him until a few years ago and he hasn’t given either company money in longer than that. And Steve jobs did t inject money into apple when they were creating the iPhone. So you’re entire point has been pretty much invalidated
    - WalterBright 5y ago
      Jobs put most of his fortune from Apple into developing Pixar, transforming it from a failure into a powerhouse. The rest went into Next, which formed the core(!) of Apple's resurgence when Apple merged with it. No Jobs money => no Pixar => no Next => no iPhone Neener neener!
    - hedora 5y ago
      Musk currently has a controlling interest in Tesla because of his stock holdings. Under the proposal, he would no longer have the holdings, and thus no longer control the company.
  - ameetgaitonde 5y ago
    A tax on personal unrealized capital gains will not take away any money from the company. It's privately-held, and has no effect on a company's balance sheet.
    - WalterBright 5y ago
      > no effect on a company's balance sheet Selling masses of stock to pay the tax will push the value of the stock down. That has a large effect on the company's ability to raise capital. As for the entrepreneur, he'll have much less capital to invest. It's a fantasy that one can extract endless billions from a company and its investors without consequences.
  - mikem170 5y ago
    I don't follow your reasoning, either. Do you really think that a new tax on several hundred billionaires will discourage the hundreds of thousands of entrepreneurs that are out there, that a significant amount of them will not bother since they can only make a few hundred million before they have an extra 15% of their money collected in taxes? Most entrepreneurs would be overjoyed to be a billionaire and have to pay that extra 15%. Seems like they'd be the lucky ones. Seems like a billionaire or an aspiring billionaire complaining about such a thing would be pretty weird. The parent you replied to mentioned wealth being locked up to avoid capital gains taxes. There are other pros and cons, I'm sure. Do you think this new tax on billionaires means that less people will be trying to become multi-millionaires? Note that I'm not happy with the current tax system, and this seems like another kludge. I also don't know that we need to coddle or incentivize wealth maintenance, it's not an end in and of itself.
    - WalterBright 5y ago
      Extracting the money from them will mean less investment. It's simple mathematics. You take away a billion from an investor, then a billion is not invested. Even worse, you're taking the money away from the most effective investors.
      - xbar 5y ago
        Exactly this. And even worse, you are disincentivizing the most effective leaders from driving their companies to huge success. It eliminates the risk to established entities to be disrupted.
      - mikem170 5y ago
        Maybe that's the part I'm confused about. Aren't they talking about taxing unrealized capital gains, i.e. money that is being left locked up in a single stock, in order to avoid being taxed when it is moved? Wouldn't one of the effects of this tax be to incentive these effective/successful billionaires into moving their money into new investments, instead of being left parked in their already successful investment? And most entrepreneurs are not, nor will never be, billionaires who are subject to this extra tax. That being the case I wouldn't think that this will put a dent in overall entrepreneurship. It might have the opposite effect, where there are numerically more entrepreneurs making capital allocation decisions, which might be better for society than having fewer people (billionaires) controlling an ever increasing amount of capital. I grant that tax changes like this have numerous conflicting effects, sometimes unpredictable. Perhaps their will be another art bubble... I don't think that it's a good thing that we structure our society for the convenience of those who can amass money. I'm definitely not fond of kludgy taxes like this one, but I also don't understand why so many jump to the defense of so few billionaires.

hellbannedguy 5y ago

You mean old middle class, and poor homeowners, can stay in the house they raised a family in? The only reason my high school educated 80 years old mother in declining health can stay in a home, and county, she feels somewhat safe is because of prop 13. Her biannual property taxes are still a big deal when they arrive. I've said this before, but I'm beginning to think if you didn't live through the craziness before Prop 13, you won't ever quite get it. Prop 13 has been the only blessing most homeowners have been given. If you want to put income limits on the gift of prop 13 fine, but doing away with it completely would be evil. By income limits I mean the guy making $600,000/year, and a huge bank account, could probally still survive without prop 13 protection. The 80 year old lady, or man, surviving on 1/2 widower's blue collar pension is another story. (I'm for means testing on all programs. I'm also for tieing all societal fees/fines---speeding tickets, registration, patent fees, etc. to 1040 income/assets wealth.)

Msw242 5y ago
Prop 13 disincentivizes building housing. Stop calling people evil just because your grandmother isn't the center of their policy concerns.
- rsj_hn 5y ago
  > Prop 13 disincentivizes building housing. I didn't think we reached the point where people are arguing that things that make housing more valuable disincentivize building more homes - but here we are. It is zoning restrictions, EIR, etc., that disincentivize housing.
  - Msw242 5y ago
    Prop 13 absolutely disincentivizes building housing. Other policies can also be bad. But grandma's house isn't being bulldozed to make way for a quadplex because she's insulated from the market. https://www.kqed.org/news/11700683/too-few-homes-is-proposition-13-to-blame-for-californias-housing-shortage https://www.kqed.org/news/11700683/too-few-homes-is-proposit... But if you own a home in California, you are incentivized to maintain prop 13. It's funny how hard it is for people to understand something when it cuts against their personal interests.

jimbob45 5y ago

Generational wealth transfer is a good thing. It's the main reason most people work hard in life - to provide a better life for their offspring. Wealth inequality is a good thing too. People who work harder necessarily live better lives. If you want to start stealing their hard work to give to the lazy, you're going to find that the hard-working flee the country à la the USSR.

elliekelly 5y ago
> It's the main reason most people work hard in life - to provide a better life for their offspring. Do you believe people without children have no motivation to work hard?
bskrobisz 5y ago
I think the primary issue is not precisely 'wealth inequality' but rather a lack of accountability and responsibility from people with large amounts of wealth. If one has assets whose value is representative of the life's work of several thousand people, it's one thing to have someone who is demonstrably capable and responsible manage it, and another thing entirely to have someone /own/ it. If I had to guess (and I clearly am) a larger proportion of people are upset with the latter than the former. Nothing is stopping someone from employing their wealth to build a yacht, fifteen McMansions, and a thirty-foot solid-gold Mothman statue just after getting off of a six-month prison stint for a billion dollars of ecological damage (all purely hypothetical but I would assert entirely plausible); that people exist with the right to exchange a colossal amount of wealth to be allowed to waste an equally colossal amount of actual effort and resources is the problem. I won't say nobody has an issue with individual people being allowed to direct huge amounts of funding, but I would assert that more people recognize that extravagant waste for the purpose of status should not be scaled to the extant degree of wealth disparity.
- WalterBright 5y ago
  If you own your house, is it unfair that you don't share it with all the people who contributed to building it? Or is it fair that you paid them what they asked for their efforts?

dcolkitt 5y ago

Except there’s a 40% estate tax still levied at each generation. Plus unlike European aristocracy, American plutocrats rarely intermarry. Even if you’re only reproducing at replacement, your wealth gets diluted by 50% each generation. Stack the two and you’re getting slashed by 80% every generation. Don’t take my word for it. How many fourth generational heirs do we see among America’s wealthiest billionaires? Essentially zero.

deleted 5y ago
[deleted]
movedx 5y ago
There are ways around this in the UK system, however. It's probably the same case in the US. The short of it is you transfer the wealth well before (15-20 years) the death occurs, thus there is no inheritance. This was used recently by an MP. That being said I agree with your thoughts, however: > How many fourth generational heirs do we see among America’s wealthiest billionaires? Essentially zero. This is probably true but I'd like to ask the question: how many of them simply inherit a lot of money without any of the fame associated with it, and just go unnoticed? I've met such a person, actually. EDIT: https://www.bbc.com/news/business-36009963 https://www.bbc.com/news/business-36009963 - this is what I was thinking about.
- dragonwriter 5y ago
  > There are ways around this in the UK system, however. It's probably the same case in the US. The short of it is you transfer the wealth well before (15-20 years) the death occurs, thus there is no inheritance. So, you pay gift taxes instead. Unless you use fake business transactions.
mywittyname 5y ago
> How many fourth generational heirs do we see among America’s wealthiest billionaires? Essentially zero. Quite a few. Not sure how long you would make four generations, but let's say 100 years. There are the obvious famous families; Ford, Rockafellers, Du Pont, Mellon, Mars, Hearst, SC Johnson ("a family company"), etc. But there are a number of billionaire families that aren't recognized much outside of their "home towns" because they started mundane things like retail stores or own mineral rights. That's not even getting into families whose wealth has diluted, but whose descendents are politicians, actors, or otherwise notable / influential people. Granted, most billion dollar businesses are <4 generations old, but more sophisticated investment vehicles exists for preserving wealth than existed even 50 years ago.

jldugger 5y ago

> This facilitates wealth transfer from generation to generation Well, arguably it's the step up in basis that enables generational transfer without taxation.