6 ms·

The buried lede is an assertion that a tax on unrealized capital gains will cause reduced private ownership of large companies, resulting in a reduced ability t

by flurie 5y ago

The buried lede is an assertion that a tax on unrealized capital gains will cause reduced private ownership of large companies, resulting in a reduced ability to handle 100-year flood events. Along the way, there are a bunch of other assertions that serve as prerequisites, like the idea that these companies can cultivate better employee loyalty and plan for longer horizons. How much do we know about how true that is, though? Do privately-owned companies disproportionately survive these sorts of events historically?

jjoonathan 5y ago
Yeah, when they get public bailouts.
whatever1 5y ago
“cause reduced private ownership of large companies, resulting in a reduced ability to handle 100-year flood events.” How the market speculation on the value of a company can affect its resiliency ? If tomorrow everyone sold Apple stock for 1 cent, why would Apple the company care ? Same revenue, same costs. Give me a break with the importance of the stock casino.
- FeepingCreature 5y ago
  It would impact Apple's ability to raise money on the stock market tho.
  - whatever1 5y ago
    Banks are in the business of giving loans and they pay professionals to evaluate the assets of borrowers. That is in contrast to me and everyone else who just gamble collectively.
  - jen20 5y ago
    It would also mean Apple have to radically restructure the compensation of many of their corporate employees to remain competitive.
  - stainforth 5y ago
    Don't they have 250 billion in Ireland or something? What money do big companies need to raise?
    - wtf42 5y ago
      > What money do big companies need to raise? For example, to buy some company to improve their business. They can do that in cash or they can issue more shares, e.g. with their Beats acquisition. > On May 28, 2014, Apple officially announced its intention to acquire Beats Electronics for $3 billion—with $400 million to be paid in Apple stock and the remainder in cash.
- jollybean 5y ago
  The assumption that stock prices don't matter, because company ABC doesn't necessarily depend on it 'for now' - is just wrong I'm afraid. If Apple crashed to 1 cent it would gut the entire market. Even just that crash alone, the amount of money wiped out, retiree savings etc., other companies would be valued lower and then the mass selloff would crush them as well. Apple may not need to 'raise money now' but it very well could in the future - and - every company is somewhat of a proxy for every other company. If there is no ROI, there is no investment, and there is no economy outside the government, it's that simple. Taxes on unrealized gains are a separate thing, and probably a bad idea - just contemplate that they would have to be paired with tax-sheilds on unrealized losses as well. Due to speculation, it would open up the door to all sorts of shenanigans. It's just a bad idea all around. Elon Musk is a 'paper zillionaire' that's very, very different than someone with a zillion in the bank. There are probably some very boring, old, already established ideas for increasing taxes on the ultra-wealthy that would probably work very well. Including getting rid of loopholes etc..
  - whatever1 5y ago
    One of the two is true: 1) The market value of a company is true, aka the owners of this company must be taxed for the real value growth in their portfolio (since it constitutes income), even if they do not sell 2) It’s a casino, a share is just a ticket that may worth nothing or a billion. In that case we don’t need tax protections. The owners of the tickets must be taxed only when they cash out. The governments should actively disincentivize gambling into this and ensure the pensions of its citizens by funding public projects and enabling future growth. You cannot have it both ways.
    - jollybean 5y ago
      Neither of those things are true. And, it's ridiculous to try to tax unrealized gains in most situations, it's unfeasible the moment you try t put a policy around it. It's a non-starter and any attempt at legislating it will fail badly and make the politicos that tried to do it look like clowns. The tools we already use are much more effective.
    - 5y ago
- lr4444lr 5y ago
  The board of directors would almost certainly buy back all their shares if that happened, and find a time to resell once the mass insanity ended for insane profit.
- philwelch 5y ago
  That wouldn’t be a problem. The problem would be if tomorrow everyone sold Apple stock for $1000, and the government took that as a reason to tax every Apple shareholder for “income” of over $800 per share in the stock casino, forcing Apple’s current shareholders to divest themselves to new shareholders and hence lose control of the company.
  - 8note 5y ago
    Should the control be tied to the stock ownership?
  - m0zg 5y ago
    As well as the fact that taxing unrealized gains would have to come with _issuing tax rebates_ for unrealized losses - something the government would find difficult to do in the case of a systemic economic downturn a-la 2008. And then there's the fact that you aren't really creating any new revenue by taxing unrealized gains if they are going to be, at some point, realized. Last I checked shares of stock aren't very useful as a payment instrument in the general case, nor would IRS accept them as taxes. This is a cynical ploy to the part of the populace that can't tell a portfolio from a hole in the ground, and there seem to be surprisingly many of such people. Also, to address GP's comment - Apple would then buy back all outstanding stock and destroy it, dramatically driving up the share price for folks who haven't sold.
    - KptMarchewa 5y ago
      >something the government would find difficult to do in the case of a systemic economic downturn a-la 2008 Not really. They'd just print more money.
      - m0zg 5y ago
        Ah but see, they'd already be printing trillions. This could get them into tens of trillions which would exacerbate the issue. This is sort of like the problem the guy alludes to: this would remove what few shock absorbers this system has.
ootsootsoots 5y ago
Behind every big corp is a well armed government and police apparatus Given how many Fortune 500 companies have died even in prosperous times since the list started, I’m gonna file this away as “manufacturing consent to maintain the status quo.” Corporations are not literal machines or organisms. They’re a social acquiescence given the reality of biological need at scale. The logistics are necessary; the behavior is necessary; the ownership angle is propaganda.
AnimalMuppet 5y ago
Well, publicly owned companies have, in the last 20+ years, been very bad at keeping spare capacity around. Lots of "rationalizations" and "rightsizing" and so on have cut all the reserves. That said, this does read like someone with a personal axe to grind, leading to motivated reasoning.
TheBigSalad 5y ago
Only the superwealthy can save us.
dillondoyle 5y ago
Looks like that won't be in the bill. But it's critical to note that the proposal has different rules for privately held stock & real estate. So the tweet author's buried argument doesn't hold water. I believe those assets would mostly be treated the same as they currently are, e.g. sold or death. For the 700 or so people who are targeted it basically creates a tax on the collateralized loans they get to avoid selling stock/cap gains in the first place. While not doing that directly, that's the effect of it. And they get 5 years to pay the initial bill. 23.8% / 5 = 4.7% growth a year to be even (well something like 6 or 7 adding the new annual 23%). Most of these guys will likely generate more on paper profit than and they get deductions for any losses if they don't It's what pisses me off most about the proposed Purdue Sackler settlement. Giving billionaires such long lead times to pay off fines and taxes allows them make more money than they owe. The last graph on the WSJ article though says “Smart investment bankers and asset managers are already thinking about how to financially engineer products that will emulate existing stocks but be hard to value” Check out the 2nd link for Pandora Paper reporting showing one egregious example of how they take advantage of this. The owner of Nike puts millions of nike stock into a GRAT, which is privately held, and then the government gives that grat a 15% discount before it's passed along to his children. Shouldn't get tax benefits for something that you claim is harder to sell (privately held stock) when in actuality the assets are 100% publicly traded nike stock. The Wyden tax bill is a 100 pages long so maybe it goes after some of that crud, but there will always a scheme to lower your taxes. https://archive.md/W2074 https://archive.md/W2074 https://archive.md/yN7M7 https://archive.md/yN7M7

by flurie 5y ago

jjoonathan 5y ago

Yeah, when they get public bailouts.

whatever1 5y ago

“cause reduced private ownership of large companies, resulting in a reduced ability to handle 100-year flood events.” How the market speculation on the value of a company can affect its resiliency ? If tomorrow everyone sold Apple stock for 1 cent, why would Apple the company care ? Same revenue, same costs. Give me a break with the importance of the stock casino.

FeepingCreature 5y ago
It would impact Apple's ability to raise money on the stock market tho.
- whatever1 5y ago
  Banks are in the business of giving loans and they pay professionals to evaluate the assets of borrowers. That is in contrast to me and everyone else who just gamble collectively.
- jen20 5y ago
  It would also mean Apple have to radically restructure the compensation of many of their corporate employees to remain competitive.
- stainforth 5y ago
  Don't they have 250 billion in Ireland or something? What money do big companies need to raise?
  - wtf42 5y ago
    > What money do big companies need to raise? For example, to buy some company to improve their business. They can do that in cash or they can issue more shares, e.g. with their Beats acquisition. > On May 28, 2014, Apple officially announced its intention to acquire Beats Electronics for $3 billion—with $400 million to be paid in Apple stock and the remainder in cash.
jollybean 5y ago
The assumption that stock prices don't matter, because company ABC doesn't necessarily depend on it 'for now' - is just wrong I'm afraid. If Apple crashed to 1 cent it would gut the entire market. Even just that crash alone, the amount of money wiped out, retiree savings etc., other companies would be valued lower and then the mass selloff would crush them as well. Apple may not need to 'raise money now' but it very well could in the future - and - every company is somewhat of a proxy for every other company. If there is no ROI, there is no investment, and there is no economy outside the government, it's that simple. Taxes on unrealized gains are a separate thing, and probably a bad idea - just contemplate that they would have to be paired with tax-sheilds on unrealized losses as well. Due to speculation, it would open up the door to all sorts of shenanigans. It's just a bad idea all around. Elon Musk is a 'paper zillionaire' that's very, very different than someone with a zillion in the bank. There are probably some very boring, old, already established ideas for increasing taxes on the ultra-wealthy that would probably work very well. Including getting rid of loopholes etc..
- whatever1 5y ago
  One of the two is true: 1) The market value of a company is true, aka the owners of this company must be taxed for the real value growth in their portfolio (since it constitutes income), even if they do not sell 2) It’s a casino, a share is just a ticket that may worth nothing or a billion. In that case we don’t need tax protections. The owners of the tickets must be taxed only when they cash out. The governments should actively disincentivize gambling into this and ensure the pensions of its citizens by funding public projects and enabling future growth. You cannot have it both ways.
  - jollybean 5y ago
    Neither of those things are true. And, it's ridiculous to try to tax unrealized gains in most situations, it's unfeasible the moment you try t put a policy around it. It's a non-starter and any attempt at legislating it will fail badly and make the politicos that tried to do it look like clowns. The tools we already use are much more effective.
  - 5y ago
lr4444lr 5y ago
The board of directors would almost certainly buy back all their shares if that happened, and find a time to resell once the mass insanity ended for insane profit.
philwelch 5y ago
That wouldn’t be a problem. The problem would be if tomorrow everyone sold Apple stock for $1000, and the government took that as a reason to tax every Apple shareholder for “income” of over $800 per share in the stock casino, forcing Apple’s current shareholders to divest themselves to new shareholders and hence lose control of the company.
- 8note 5y ago
  Should the control be tied to the stock ownership?
- m0zg 5y ago
  As well as the fact that taxing unrealized gains would have to come with _issuing tax rebates_ for unrealized losses - something the government would find difficult to do in the case of a systemic economic downturn a-la 2008. And then there's the fact that you aren't really creating any new revenue by taxing unrealized gains if they are going to be, at some point, realized. Last I checked shares of stock aren't very useful as a payment instrument in the general case, nor would IRS accept them as taxes. This is a cynical ploy to the part of the populace that can't tell a portfolio from a hole in the ground, and there seem to be surprisingly many of such people. Also, to address GP's comment - Apple would then buy back all outstanding stock and destroy it, dramatically driving up the share price for folks who haven't sold.
  - KptMarchewa 5y ago
    >something the government would find difficult to do in the case of a systemic economic downturn a-la 2008 Not really. They'd just print more money.
    - m0zg 5y ago
      Ah but see, they'd already be printing trillions. This could get them into tens of trillions which would exacerbate the issue. This is sort of like the problem the guy alludes to: this would remove what few shock absorbers this system has.

ootsootsoots 5y ago

Behind every big corp is a well armed government and police apparatus Given how many Fortune 500 companies have died even in prosperous times since the list started, I’m gonna file this away as “manufacturing consent to maintain the status quo.” Corporations are not literal machines or organisms. They’re a social acquiescence given the reality of biological need at scale. The logistics are necessary; the behavior is necessary; the ownership angle is propaganda.

AnimalMuppet 5y ago

Well, publicly owned companies have, in the last 20+ years, been very bad at keeping spare capacity around. Lots of "rationalizations" and "rightsizing" and so on have cut all the reserves. That said, this does read like someone with a personal axe to grind, leading to motivated reasoning.

TheBigSalad 5y ago

Only the superwealthy can save us.

dillondoyle 5y ago

Looks like that won't be in the bill. But it's critical to note that the proposal has different rules for privately held stock & real estate. So the tweet author's buried argument doesn't hold water. I believe those assets would mostly be treated the same as they currently are, e.g. sold or death. For the 700 or so people who are targeted it basically creates a tax on the collateralized loans they get to avoid selling stock/cap gains in the first place. While not doing that directly, that's the effect of it. And they get 5 years to pay the initial bill. 23.8% / 5 = 4.7% growth a year to be even (well something like 6 or 7 adding the new annual 23%). Most of these guys will likely generate more on paper profit than and they get deductions for any losses if they don't It's what pisses me off most about the proposed Purdue Sackler settlement. Giving billionaires such long lead times to pay off fines and taxes allows them make more money than they owe. The last graph on the WSJ article though says “Smart investment bankers and asset managers are already thinking about how to financially engineer products that will emulate existing stocks but be hard to value” Check out the 2nd link for Pandora Paper reporting showing one egregious example of how they take advantage of this. The owner of Nike puts millions of nike stock into a GRAT, which is privately held, and then the government gives that grat a 15% discount before it's passed along to his children. Shouldn't get tax benefits for something that you claim is harder to sell (privately held stock) when in actuality the assets are 100% publicly traded nike stock. The Wyden tax bill is a 100 pages long so maybe it goes after some of that crud, but there will always a scheme to lower your taxes. https://archive.md/W2074 https://archive.md/W2074 https://archive.md/yN7M7 https://archive.md/yN7M7