5 ms·

My understanding was that the wealthy essentially do not have income, their net-worth is tied to their stock ownership. Tax on capital gains do not work to tax

My understanding was that the wealthy essentially do not have income, their net-worth is tied to their stock ownership. Tax on capital gains do not work to tax them either since they don't sell their stocks but take loans against them. In what way should these systems be changed, or new systems be used, to appropriately tax them without compromising their ownership of the companies they built?

itishappy 3y ago
Sounds like you're already aware of the pain points. Is there some reason to expect the issues you mention are not addressable?
- ad404b8a372f2b9 3y ago
  You tell me, that's what I'm asking.
  - itishappy 3y ago
    Not an economist, but I can't imagine so. You seem to think different, that's why I'm turning it around. Am I off base?
    - ad404b8a372f2b9 3y ago
      You are. I'm trying to understand the problem and solution space. - From the perspective of a communist, it's clear. - From the perspective of a libertarian, it's clear. - From the perspective of people who want to stay within the bounds of capitalism but would like to have some way to curtail inequality, a group to which I belong, it's not clear. If you're of the same beliefs but are unable to present and defend a specific solution to address the problems presented, as I am, you should welcome those questions.
      - itishappy 3y ago
        I'm of the same beliefs, but I think the situation is pretty clear: tax loopholes allow capital gains to go untaxed. You mentioned two specific issues that seem straightforward to my unknowledgeable self, and I do not understand the complications you originally mentioned with regards to "allowing the rewards to be commensurate with the risks, rewarding people who work harder and have more qualifications, and preserving ownership." I'm not trying to fight you, I'm unclear on where you're unclear and trying to understand.
        ad404b8a372f2b9 3y ago
        I'm not trying to fight either, what I'm unclear on are the specifics of the fix. If they don't sell, no capital gains are realized, so what do you tax?
        itishappy 3y ago
        Ah, I think I get it. Thanks! I'm not going to be able to comment on that with any confidence.
        eszed 3y ago
        Not confident in this space, either, but it seems like the loan is the loophole. So maybe using an asset as collateral counts as realizing capital gains? (And, yes, of course: establish a sensible annual exclusion, so no one accuses me of trying to demolish second mortgages for middle-class families, or whatever.) What (good-faith) second-order drawbacks might this have? I'm genuinely curious about whether this would be a feasible idea.
techdmn 3y ago
First thing's first, taxes on capital gains should be much higher, and always higher than taxes on wages. Second, loans require repayment. Even if the bank accepts your stock directly as payment, there's a taxable transaction. I don't understand how loans evade taxation. Third, marginal tax rates used to be MUCH higher than they are today. Example from USA Today: "For married people filing jointly in 1953, for example, any income above $200,000 was taxed at 90%, above $300,000 at 91%, and above $400,000 at 92%."
- ad404b8a372f2b9 3y ago
  Interesting, I didn't know the rates used to be that high. I don't understand fully how loans evade taxation either. What I've read is that it's a combination of: - They can be carried forward into other loans. - They don't repay them, they only pay the interests. - They aren't close in amount to their actual net-worth. So most of the money they own is not liquid and not subject to those taxes. Unless we're talking about a wealth tax, which I'd be interested in seeing an argument for as well.
hn_acker 3y ago
If you scroll a bit into the "400 richest Americans" section, the author brings up taxing stocks. (Copy and Ctrl-F to see it on the site.) > Some will argue that using this wealth for public benefit is not possible, because it's "tied up" in stocks, and therefore inaccessible. This is just not true. On the featured site the last sentence links to the author's argument that taxing stocks is possible over a period of years or decades [1]. For context, the author of the site is Matt Korostoff. [1] https://github.com/MKorostoff/1-pixel-wealth/blob/master/THE_PAPER_BILLIONAIRE.md https://github.com/MKorostoff/1-pixel-wealth/blob/master/THE...

itishappy 3y ago

Sounds like you're already aware of the pain points. Is there some reason to expect the issues you mention are not addressable?

ad404b8a372f2b9 3y ago
You tell me, that's what I'm asking.
- itishappy 3y ago
  Not an economist, but I can't imagine so. You seem to think different, that's why I'm turning it around. Am I off base?
  - ad404b8a372f2b9 3y ago
    You are. I'm trying to understand the problem and solution space. - From the perspective of a communist, it's clear. - From the perspective of a libertarian, it's clear. - From the perspective of people who want to stay within the bounds of capitalism but would like to have some way to curtail inequality, a group to which I belong, it's not clear. If you're of the same beliefs but are unable to present and defend a specific solution to address the problems presented, as I am, you should welcome those questions.
    - itishappy 3y ago
      I'm of the same beliefs, but I think the situation is pretty clear: tax loopholes allow capital gains to go untaxed. You mentioned two specific issues that seem straightforward to my unknowledgeable self, and I do not understand the complications you originally mentioned with regards to "allowing the rewards to be commensurate with the risks, rewarding people who work harder and have more qualifications, and preserving ownership." I'm not trying to fight you, I'm unclear on where you're unclear and trying to understand.
      - ad404b8a372f2b9 3y ago
        I'm not trying to fight either, what I'm unclear on are the specifics of the fix. If they don't sell, no capital gains are realized, so what do you tax?
        itishappy 3y ago
        Ah, I think I get it. Thanks! I'm not going to be able to comment on that with any confidence.
        eszed 3y ago
        Not confident in this space, either, but it seems like the loan is the loophole. So maybe using an asset as collateral counts as realizing capital gains? (And, yes, of course: establish a sensible annual exclusion, so no one accuses me of trying to demolish second mortgages for middle-class families, or whatever.) What (good-faith) second-order drawbacks might this have? I'm genuinely curious about whether this would be a feasible idea.

techdmn 3y ago

First thing's first, taxes on capital gains should be much higher, and always higher than taxes on wages. Second, loans require repayment. Even if the bank accepts your stock directly as payment, there's a taxable transaction. I don't understand how loans evade taxation. Third, marginal tax rates used to be MUCH higher than they are today. Example from USA Today: "For married people filing jointly in 1953, for example, any income above $200,000 was taxed at 90%, above $300,000 at 91%, and above $400,000 at 92%."

ad404b8a372f2b9 3y ago
Interesting, I didn't know the rates used to be that high. I don't understand fully how loans evade taxation either. What I've read is that it's a combination of: - They can be carried forward into other loans. - They don't repay them, they only pay the interests. - They aren't close in amount to their actual net-worth. So most of the money they own is not liquid and not subject to those taxes. Unless we're talking about a wealth tax, which I'd be interested in seeing an argument for as well.

hn_acker 3y ago

If you scroll a bit into the "400 richest Americans" section, the author brings up taxing stocks. (Copy and Ctrl-F to see it on the site.) > Some will argue that using this wealth for public benefit is not possible, because it's "tied up" in stocks, and therefore inaccessible. This is just not true. On the featured site the last sentence links to the author's argument that taxing stocks is possible over a period of years or decades [1]. For context, the author of the site is Matt Korostoff. [1] https://github.com/MKorostoff/1-pixel-wealth/blob/master/THE_PAPER_BILLIONAIRE.md https://github.com/MKorostoff/1-pixel-wealth/blob/master/THE...