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Taxation of Carried Interest

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Re: Taxation of Carried Interest

#131

Post by kisstheblade »

stealthmodeclan wrote: post #117
beat wrote: post #54

The correct solution to this problem is to abolish the distinction between capital gains and ordinary income (ie wages), and abolish the corporate income tax that justifies the "double taxation" argument that justifies the capital gains rate. Capital gains is why Mitt Romney can make 200 times as much as I do in a year, and pay half my effective tax rate. This is broad across the economy. It's a fundamentally immoral…

I don't have problem with rich people making more money. After all capital should go to people who can best use it. Did you also create as much as value as Mitt Romney? As many jobs created? If not then i think he deserves more money, so that he can continue doing that. If James and Bob both make $100 but James invested that money into company (which used his capital to create more jobs) while Bob simply hold onto th…

By all means he deserves more money, no problem. But why with a lower tax rate?

Re: Taxation of Carried Interest

#132

Post by notahacker »

hippich wrote: post #72
forapurpose wrote: post #67

Earlier quoted context omitted.

> people who paid for it the most If we are talking about equal sacrifice, they did not pay the most, they paid as much as anyone else. > hen someone pays a lot of money into federal treasury - nil Why should they get any praise for doing their share? Or everyone should get praise (which I support). The premise that someone is somehow superior for doing their fair share is fallacious. They are not aristocrats condesc…

> If we are talking about equal sacrifice, they did not pay the most, they paid as much as anyone else. I am talking in absolute numbers. There is plenty of research on who is paying the most taxes. A just random result from google - http://www.pewresearch.org/fact-tank/2017/10/06/a-closer-loo... " A Pew Research Center analysis of IRS data from 2015, the most recent available, shows that taxpayers with incomes of $2…

They also benefit the most from government in absolute terms, since the extent of their wealth in the absence of government would be limited to the tiny fraction of their assets that would still meaningfully exist and could reliably be defended with their personal militia.

Re: Taxation of Carried Interest

#133

Post by Lazare »

colechristensen wrote: post #111
beat wrote: post #54

The correct solution to this problem is to abolish the distinction between capital gains and ordinary income (ie wages), and abolish the corporate income tax that justifies the "double taxation" argument that justifies the capital gains rate. Capital gains is why Mitt Romney can make 200 times as much as I do in a year, and pay half my effective tax rate. This is broad across the economy. It's a fundamentally immoral…

If you abolish corporate taxation, (rich) people will just use them to avoid taxes. Won't have to pay any tax on investment growth if you wrap all your investments in a corporation. Hiring me? No you're hiring my corporation, which pays me a meager salary. Company car? Check. Company apartment? Check. There is another consideration, you want to motivate people with lots of money to invest it somewhere. Money sitting…

> If you abolish corporate taxation, (rich) people will just use them to avoid taxes.

That's already a loophole, or it would be, except the tax code has already closed it. You're about 40 years too late.

> Company car? Check.

Already taxed, heavily. The whole "just hide your income in a company" gambit doesn't work. Corporations are already taxed much lower than the top marginal rate of income, so people already want to do this.

> Money sitting on a bank ledger can't do nearly as much as money in a venture capital fund.

The whole point of a "bank" as a concept is that they solve this issue through maturity transformation. Your money doesn't just sit on a bank ledger; it gets lent out to do things such as, yes, invest in venture capital funds.

Re: Taxation of Carried Interest

#134

Post by namibj »

stealthmodeclan wrote: post #119
icebraining wrote: post #115

Earlier quoted context omitted.

Company car? Check. Company apartment? Check. All that can be taxed as well.

All that can be taxed as well. At the risk of increased compliance cost?

Just count every benefit one can feasibly calculate a dollar amount for the company provides the employee to the income for purposes of calculating income tax due. In German law there is a phrase for that, geldwerter Vorteil, formally Sachbezug. The wording is: > EStG §8 Abs. 2 Einnahmen, die nicht in Geld bestehen (Wohnung, Kost, Waren, Dienstleistungen und sonstige Sachbezüge), sind mit den um übliche Preisnachlässe geminderten üblichen Endpreisen am Abgabeort anzusetzen. This translates to: > Income, which does not consist of money (housing, food, goods, service and other employee benefits), are to be taken at the, reduced by usual price discounts, usual end prices at the place of fulfillment. There were minor re-orderings, due to the German language having somewhat different rules regarding word ordering, and some words not mapping 1:1 to their English counterpart. As you can see by the strange sentence structure in the translation, I skipped any such cosmetic changes, only using the bare minimum to try to keep the semantic of the predominant parsing the same as in the original.

Re: Taxation of Carried Interest

#135

Post by notahacker »

WalterBright wrote: post #120
Declanomous wrote: post #91

Earlier quoted context omitted.

I never said that less efficient resource allocation would result in more utility. That's a straw man. My claim is the argument that more efficient resource allocation would result in greater utility is almost certainly false in a hypothetical situation where capital gains tax is eliminated. What evidence have we ever seen that allowing wealthy individuals to make more money results in increased utility? There is lit…

> What evidence have we ever seen that allowing wealthy individuals to make more money results in increased utility? SpaceX is a modern example. Historically, people of great wealth have been able to invest in great projects. Scientists historically have been wealthy people. The guy who won WW2 was a wealthy man who invested his fortune into developing radar. Many historians believe that radar shortened the war consi…

I can't think of worse examples of industries supposed to benefit from reducing funds available for government investment to ensure more funds are available for private investment than space and defence, which have depended almost entirely on government investment.

Similarly, charitable donations are generally tax deductible so again, if anything, capital gains taxes serve to encourage people to allocate more of their returns to it.

Re: Taxation of Carried Interest

#136

Post by Dowwie »

New Jersey's new governor campaigned on multiple radical changes, including a "wealth tax". The governor is now trying to push this through Trenton. However, the Senate leader of NJ (Sweeney), although a Democrat, was recently reelected in what was one of the most expensive NJ Senate elections in history. Sweeney could not have succeeded at this game without the financial support of those who are most exposed to such a wealth tax. Naturally, Sweeney is sensitive to their tax exposure and has consequently opposed Murphy's plans.

I don't see NJ taxing capital gains in an administration that has many other bold plans requiring party support.

Re: Taxation of Carried Interest

#137

Post by marvin »

beat wrote: post #54

The correct solution to this problem is to abolish the distinction between capital gains and ordinary income (ie wages), and abolish the corporate income tax that justifies the "double taxation" argument that justifies the capital gains rate. Capital gains is why Mitt Romney can make 200 times as much as I do in a year, and pay half my effective tax rate. This is broad across the economy. It's a fundamentally immoral…

Capital gains is not necessarily an immoral tax, but it's not obvious that the people who make this argument would enjoy the alternative.

In Norway, capital gains and corporate income tax are set such that they are (practically) identical to the income tax when they are both applied. So gains from owning shares in a company will not give you a tax advantage over receiving wages from said company.

Then again, this is exactly the argument you're making - ensure that corporate + capital gains taxation is identical to the income tax.

The difference that we still have a corporate income tax. I would think it's necessary to keep this, or else capital owners would just avoid realizing profits at all, while waiting for the political climate to favor reducing the capital gains tax again. With an annual tax on corporate profits, you ensure that capital owners are forced to contribute to a degree no matter what. But consumption is still taxed.

Re: Taxation of Carried Interest

#138

Post by evgen »

lpolovets wrote: post #129

(Disclosure: I'm a VC in California, which is one of the states proposing this tax.) For what it's worth, the tax rates being proposed on carried interest in these states are very high. E.g. California is proposing 17% while Maryland is proposing 19%. The result is that these carry taxes combined with a capital gains tax can be significantly higher than regular income taxes. I think imposing taxes of this size at the…

Sounds like win-win. CA gets the parasites to move, then gets to declare that the policy works because CA companies still get investment, then the policy gets applied nationally. What's not to like?

Re: Taxation of Carried Interest

#139

Post by WalterBright »

notahacker wrote: post #135
WalterBright wrote: post #120

Earlier quoted context omitted.

> What evidence have we ever seen that allowing wealthy individuals to make more money results in increased utility? SpaceX is a modern example. Historically, people of great wealth have been able to invest in great projects. Scientists historically have been wealthy people. The guy who won WW2 was a wealthy man who invested his fortune into developing radar. Many historians believe that radar shortened the war consi…

I can't think of worse examples of industries supposed to benefit from reducing funds available for government investment to ensure more funds are available for private investment than space and defence, which have depended almost entirely on government investment. Similarly, charitable donations are generally tax deductible so again, if anything, capital gains taxes serve to encourage people to allocate more of thei…

SpaceX shows that people with great wealth can embark on successful space programs.

> charitable donations are generally tax deductible

I find it ironic the complaint that wealthy don't use their money to help social causes and yet complain that such help is tax deductible.

Re: Taxation of Carried Interest

#140

Post by lotsofpulp »

tim333 wrote: post #127
beat wrote: post #54

The correct solution to this problem is to abolish the distinction between capital gains and ordinary income (ie wages), and abolish the corporate income tax that justifies the "double taxation" argument that justifies the capital gains rate. Capital gains is why Mitt Romney can make 200 times as much as I do in a year, and pay half my effective tax rate. This is broad across the economy. It's a fundamentally immoral…

Simply taxing gains as ordinary income is often unfair because it taxes stuff going up in nominal terms without actually being worth more in real terms. You can get around this by indexing for inflation, which gets complicated, or taxing it at a lower rate. Carried interest isn't really capital gains - it's income and should be taxed as that. The deeper problem is if there is some way to reform the political system t…

Isn't that how income tax works too? Why should cap gains be different?
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