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What do you think "being a billionaire" means? If you start and retain ownership of a company that is one worth day a billion dollars, you're a billionaire. T

by avalys 4y ago

What do you think "being a billionaire" means? If you start and retain ownership of a company that is one worth day a billion dollars, you're a billionaire. That doesn't mean you have a billion dollars in cash. It doesn't mean you have a billion dollars in hard assets. It means you built a functioning organization that is performing some valuable service in society, and some accountant has associated some value to that entire organization of more than $1,000,000,000. At what point do you think founders should be punished for that accomplishment by having some of their ownership stake taken away from them?

spywaregorilla 4y ago
> At what point do you think founders should be punished for that accomplishment by having some of their ownership stake taken away from them? When they sell it for a billion dollars.
- ipaddr 4y ago
  They don't sell it now they borrow money against the value of shares and get to keep the stock, not pay taxes because it is not income. Your plan would not work. No plan like this could work...
- avalys 4y ago
  Sure, that would be a reasonable position, but most people the media characterizes as "billionaires" have not actually sold their company for a billion dollars. This is a fundamental misconception. These listings of "net worth", etc. all include the nominal market value of their remaining ownership of whatever company they founded. Jeff Bezos has a "net worth" of $160B. That's not because he sold Amazon for $160B. It's because Amazon is worth $2T and he still owns 8% of it. At what point would you suggest the government should have taken away that 8% ownership so he would not become a billionaire?
  - spywaregorilla 4y ago
    > At what point would you suggest the government should have taken away that 8% ownership so he would not become a billionaire? I'm not suggesting that. It's ok if people are billionaires, if defined by having large holdings that, if liquidated, would shrink to non billionaire scales to give back to society.
  - kasey_junk 4y ago
    Those billionaires don’t sell their shares but they do take extremely low interest loans that are non-taxed against those shares kicking their tax obligations into future generations while using liquidity to live as if they’ve sold the shares. So I’d suggest the tax code be amended to account for that.
    - avalys 4y ago
      That's also a reasonable suggestion. It wouldn't stop them from becoming billionaires. The GP suggested "every billionaire is a policy failure". What's the policy success that prevents this failure? "No one is allowed to start a company by themselves"? "No one is allowed to join a startup unless they get more than X% equity"? "Startup founders must give more than X% equity to their first N employees and/or investors"? "Bootstrapped startups are not allowed"? "Once a startup becomes more successful than X, the founder must sell"?
    - missedthecue 4y ago
      But eventually the tax liability is paid. If after death, they get hit with the estate tax which is even worse than just eating the income tax. Taking out loans defers tax. It does not avoid or lower it.
      - kasey_junk 4y ago
        Ah but you see, once you are ready for your estate to take the money you set up a granter retained annuity trust. So long as you don’t die, and your trust earns more than the IRS theoretical rate you can pass on the money almost tax free. While still getting loans against it.
        missedthecue 4y ago
        If you put assets in a GRAT you can't borrow money against it
        sokoloff 4y ago
  - int_19h 4y ago
    It should not be possible for a single person to own 8% of the company the size of Amazon. If you're starting from scratch, there are many ways to do so. For example, make issuing corporate charters contingent on being employee-owned - so if the company grows, so does the number of owners. If you're starting with an economy with extreme concentration of capital to begin with, gradually ratcheting up progressive taxation on such concentrated capital seems like a straightforward way to force the owners to spread it around.
    - bslorence 4y ago
      Or you can offer substantial tax incentives for founders to cash out by selling to their own employees; e.g., the ESOP system in the US.
Tiktaalik 4y ago
The problem is that at the moment a billionaire can leverage their paper wealth into incredible loans and power without actually selling their ownership stake and realizing their billion in cash.

by avalys 4y ago

spywaregorilla 4y ago

> At what point do you think founders should be punished for that accomplishment by having some of their ownership stake taken away from them? When they sell it for a billion dollars.

ipaddr 4y ago
They don't sell it now they borrow money against the value of shares and get to keep the stock, not pay taxes because it is not income. Your plan would not work. No plan like this could work...
avalys 4y ago
Sure, that would be a reasonable position, but most people the media characterizes as "billionaires" have not actually sold their company for a billion dollars. This is a fundamental misconception. These listings of "net worth", etc. all include the nominal market value of their remaining ownership of whatever company they founded. Jeff Bezos has a "net worth" of $160B. That's not because he sold Amazon for $160B. It's because Amazon is worth $2T and he still owns 8% of it. At what point would you suggest the government should have taken away that 8% ownership so he would not become a billionaire?
- spywaregorilla 4y ago
  > At what point would you suggest the government should have taken away that 8% ownership so he would not become a billionaire? I'm not suggesting that. It's ok if people are billionaires, if defined by having large holdings that, if liquidated, would shrink to non billionaire scales to give back to society.
- kasey_junk 4y ago
  Those billionaires don’t sell their shares but they do take extremely low interest loans that are non-taxed against those shares kicking their tax obligations into future generations while using liquidity to live as if they’ve sold the shares. So I’d suggest the tax code be amended to account for that.
  - avalys 4y ago
    That's also a reasonable suggestion. It wouldn't stop them from becoming billionaires. The GP suggested "every billionaire is a policy failure". What's the policy success that prevents this failure? "No one is allowed to start a company by themselves"? "No one is allowed to join a startup unless they get more than X% equity"? "Startup founders must give more than X% equity to their first N employees and/or investors"? "Bootstrapped startups are not allowed"? "Once a startup becomes more successful than X, the founder must sell"?
  - missedthecue 4y ago
    But eventually the tax liability is paid. If after death, they get hit with the estate tax which is even worse than just eating the income tax. Taking out loans defers tax. It does not avoid or lower it.
    - kasey_junk 4y ago
      Ah but you see, once you are ready for your estate to take the money you set up a granter retained annuity trust. So long as you don’t die, and your trust earns more than the IRS theoretical rate you can pass on the money almost tax free. While still getting loans against it.
      - missedthecue 4y ago
        If you put assets in a GRAT you can't borrow money against it
        sokoloff 4y ago
- int_19h 4y ago
  It should not be possible for a single person to own 8% of the company the size of Amazon. If you're starting from scratch, there are many ways to do so. For example, make issuing corporate charters contingent on being employee-owned - so if the company grows, so does the number of owners. If you're starting with an economy with extreme concentration of capital to begin with, gradually ratcheting up progressive taxation on such concentrated capital seems like a straightforward way to force the owners to spread it around.
  - bslorence 4y ago
    Or you can offer substantial tax incentives for founders to cash out by selling to their own employees; e.g., the ESOP system in the US.

Tiktaalik 4y ago

The problem is that at the moment a billionaire can leverage their paper wealth into incredible loans and power without actually selling their ownership stake and realizing their billion in cash.