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The holders would pay less in taxes when the valuation drops, why would they get a credit? Also, the only people who would be subject to those taxes are already

The holders would pay less in taxes when the valuation drops, why would they get a credit? Also, the only people who would be subject to those taxes are already extraordinarily wealthy, so who cares?

danhak 4y ago
Because the policy will bankrupt founders. Imagine you're the founder of NFLX and you held $1 billion worth of stock at the peak last year ($690 / share) The IRS says you owe $300 million (30% of your unrealized gains) Fast forward to spring 2022. The stock has crashed to $186, your shares are worth only $270 million but you owe a $300 million tax bill. Not to mention the impossible situation this creates for corporate governance and the general functioning of a business when founders / board members are constantly forced to divest and therefore no one can know who will even control the company from quarter to quarter.
- arrosenberg 4y ago
  The majority of the hypothetical Reed Hastings in that scenario are also borrowing against and investing off of that $1B in equity. Maybe he should have diversified better, and I don’t see why the average person should care.
logicalmonster 4y ago
> The holders would pay less in taxes when the valuation drops, why would they get a credit? Perhaps you're not familiar with some of the proposals to tax unrealized gains or what this means. This means there have been serious proposals from so-called serious people to tax individuals when a stock they're holding goes up, even if they don't sell that. So somebody is making a point that nobody has made a serious proposal to give a similar credit for unrealized losses. It's just the government wanting to tax and take and take. > Also, the only people who would be subject to those taxes are already extraordinarily wealthy, so who cares? You've got it backwards. The already wealthy aren't the ones bothered by paying a bit more taxes on unrealized gains too much. If Warren Buffet had to pay an extra few million because a stock he held went up, he probably wouldn't really notice. It wouldn't even be a buzzkill on his day. In the event of a tax on unrealized gains, it's the middle class dude who made a great investment on the next Apple who is screwed over from holding for a few years because he has to sell the second the price went up just a bit to pay that tax.
- arrosenberg 4y ago
  No one is proposing those taxes on middle class people. For example, Elizabeth Warren’s proposals would only affect those with more than $50M in assets. Second, the proposal isn’t to tax on price changes, its taxing the value of the asset at a given point in time. If the value goes down, the tax collected goes down. This is also how property taxes work - it’s a percentage of the assessed value. If the assessed value drops, you pay less in taxes.
  - jen20 4y ago
    It’s just a matter of time before this hits everyone once the principle is established.
- seoaeu 4y ago
  Your “so-called serious people” swipe doesn’t exactly convey that you are making a good faith effort to understand these proposals… Also, there no reason a middle class investor would have to sell all their stock to pay taxes. If the value of your portfolio doubled, you’d only have to sell between 7.5% and 10% of your holdings to cover the taxes (at the current capital gains tax rates).
  - AdrianB1 4y ago
    And dilute your percentage in the process. That sounds incredibly stupid for any founder.
    - seoaeu 4y ago
      Obviously startup founders would prefer to get rich without paying taxes. That doesn’t mean the rest of society should let them.
      - AdrianB1 4y ago
        If all you own is shares in a company, you are not rich, you can be homeless. If you sell your shares and make money out of that, then is the moment to pay your taxes, not a nanosecond before that.

The holders would pay less in taxes when the valuation drops, why would they get a credit? Also, the only people who would be subject to those taxes are already extraordinarily wealthy, so who cares?

danhak 4y ago

Because the policy will bankrupt founders. Imagine you're the founder of NFLX and you held $1 billion worth of stock at the peak last year ($690 / share) The IRS says you owe $300 million (30% of your unrealized gains) Fast forward to spring 2022. The stock has crashed to $186, your shares are worth only $270 million but you owe a $300 million tax bill. Not to mention the impossible situation this creates for corporate governance and the general functioning of a business when founders / board members are constantly forced to divest and therefore no one can know who will even control the company from quarter to quarter.

arrosenberg 4y ago
The majority of the hypothetical Reed Hastings in that scenario are also borrowing against and investing off of that $1B in equity. Maybe he should have diversified better, and I don’t see why the average person should care.

logicalmonster 4y ago

> The holders would pay less in taxes when the valuation drops, why would they get a credit? Perhaps you're not familiar with some of the proposals to tax unrealized gains or what this means. This means there have been serious proposals from so-called serious people to tax individuals when a stock they're holding goes up, even if they don't sell that. So somebody is making a point that nobody has made a serious proposal to give a similar credit for unrealized losses. It's just the government wanting to tax and take and take. > Also, the only people who would be subject to those taxes are already extraordinarily wealthy, so who cares? You've got it backwards. The already wealthy aren't the ones bothered by paying a bit more taxes on unrealized gains too much. If Warren Buffet had to pay an extra few million because a stock he held went up, he probably wouldn't really notice. It wouldn't even be a buzzkill on his day. In the event of a tax on unrealized gains, it's the middle class dude who made a great investment on the next Apple who is screwed over from holding for a few years because he has to sell the second the price went up just a bit to pay that tax.

arrosenberg 4y ago
No one is proposing those taxes on middle class people. For example, Elizabeth Warren’s proposals would only affect those with more than $50M in assets. Second, the proposal isn’t to tax on price changes, its taxing the value of the asset at a given point in time. If the value goes down, the tax collected goes down. This is also how property taxes work - it’s a percentage of the assessed value. If the assessed value drops, you pay less in taxes.
- jen20 4y ago
  It’s just a matter of time before this hits everyone once the principle is established.
seoaeu 4y ago
Your “so-called serious people” swipe doesn’t exactly convey that you are making a good faith effort to understand these proposals… Also, there no reason a middle class investor would have to sell all their stock to pay taxes. If the value of your portfolio doubled, you’d only have to sell between 7.5% and 10% of your holdings to cover the taxes (at the current capital gains tax rates).
- AdrianB1 4y ago
  And dilute your percentage in the process. That sounds incredibly stupid for any founder.
  - seoaeu 4y ago
    Obviously startup founders would prefer to get rich without paying taxes. That doesn’t mean the rest of society should let them.
    - AdrianB1 4y ago
      If all you own is shares in a company, you are not rich, you can be homeless. If you sell your shares and make money out of that, then is the moment to pay your taxes, not a nanosecond before that.