Taxation of Carried Interest • Hacker News Board

Re: Taxation of Carried Interest

#191

Post by saalweachter » Sun, Jun 10, 2018, 2:58 PM UTC

zimablue wrote: post #147

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…

Abolishing corporation tax has always seemed to me like something that makes sense only in a quite naive view of the world. The idea is always just to tax methods of getting income out of a corporation instead, (income, dividends) but there's a problem with this idea. There are infinite ways to get your money out of a corporation. If you start off with: power is power all forms of power can be transferred into money…

Not to mention, it assumes a priori that double taxation is bad.

Double taxation has consequences, which may be bad or good in different situations, but isn’t itself bad or good. Hell, I’m now getting double taxed, through the adjustment to the SALT deductions.

Re: Taxation of Carried Interest

#192

Post by stealthmodeclan » Sun, Jun 10, 2018, 3:07 PM UTC

Applejinx wrote: post #187

stealthmodeclan wrote: post #117

Earlier quoted context omitted.

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…

We are (literally or figuratively) in Silicon Valley, disrupting everything. Why is anybody suggesting that innovating in the form of investment into companies, is creating jobs? Value, yes, by definition since it produces enormous wealth done properly. Why would anybody think this behavior creates jobs when ideally it tends to eliminate ALL jobs and charge eagerly into that Star Trek future? 'capital investment crea…

'capital investment creates jobs' is a completely outdated concept that will never, ever return to validity.

Why look at it in isolation?

Here we comparing taking a job and collecting a paycheck vs investing capital.

Investing capital is more likely to create or eliminate jobs which makes economy efficient than taking a simple job.

Re: Taxation of Carried Interest

#193

Post by Frondo » Sun, Jun 10, 2018, 3:24 PM UTC

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…

"Rich people fund research universities after getting rich" seems like a far less efficient way to fund research universities than not letting them get so rich in the first place.

I'd prefer the direct route of funding them from the public coffers than waiting on the largess of rich people to fund them decades after their fortunes have been made.

Re: Taxation of Carried Interest

#194

Post by drblast » Sun, Jun 10, 2018, 3:29 PM UTC

etaty wrote: post #124

Capital gain tax or income gain tax are designed to make the wealthy wealthier. Don't tax "gain", tax the "wealth". This will make it harder and harder to hoard wealth as you gain wealth. Every other "tax" can then be removed. So with the "wealth" taxt, every year you sum all your possessions and you give X% (20%?) to the government. This look simple enough to me, did any country try that?

Inflation is a wealth tax.

It's not necessary for the government to ever tax anyone for anything; they could just print the money and all "taxes" would come in the form of inflation instead. And that tax would be simple and unavoidable.

A very progressive tax system could be "print money and give it to everyone equally." If you're poor the guaranteed income would be a huge percentage of your wealth and since you have no savings the resulting inflation would affect you least. The wealthy with savings would essentially be taxed like you describe at the inflation rate.

This is a thought experiment rather than a suggestion for a workable system, but I think like the "ideal op-amp" it might be useful to compare tax systems to this one.

Re: Taxation of Carried Interest

#195

Post by MR4D » Sun, Jun 10, 2018, 3:32 PM UTC

forapurpose wrote: post #69

MR4D wrote: post #45

Earlier quoted context omitted.

I’ll pick out one point that you seem to miss - when the US taxed the heck out of people with high incomes, you still had people like Howard Hughes, Warren Buffet, and John Paul Getty becoming even richer than they were before. So yes, the rich get richer, and high taxes do not stop that (but present the illusion that it stops ). I’ll gladly admit I’m wrong if you can disprove my three simple examples. Last I hexked,…

I don't think three examples are representative of the wealthy overall. I didn't say 'no rich get richer'; beyond a doubt, some do - and that's fine and fully compatible with meritocracy. The question is, what is the overall trend? Is there social mobility, opportunity and meritocracy, or aristocratic power and inheritence?

Ok. Interesting point you have. But let’s dive into something that shows how statstics can get really skewed:

Take money 100 years ago. The richest guy on the planet (ignoring royalty, as those figures aren’t reliable) was John D Rockefeller. He was worth a ton of money, possibly even a billion dollars. Today’s richest man in Jeff Bezos, worth about 100 times that (depending on the stock price, somewhere roughly between 100-125 billion).

So today, people say that the wealth gap is growing. Indeed, the rich are richer.

However, at his peak, Rockefeller was worth about 1.5% of GDP ( a truly crazy sum of money that equates to roughly $350 billion today).

So if we look at inflation-adjusted money, the rich are poorer than they were 100 years ago - indeed, Rockefeller was about 3 times richer than Bezos.

So depending on the metric, the rich are getting richer, and wealth disparities are growing. But when you normalize for inflation one other factors, the disparity is not growing.

Also, if you take the poorest person at the world with zero dollars, and the richest person in the world with one more dollar, than the wealth disparity is growing, and headlines shout out crazy stuff that sets everyone’s emotions.

But zero will always be the lower bound, and the number at the top will always grow (assuming inflation).

So is disparity growing or now? Well, I think the best way to answer that is ask this question: “would you rather be you today, or Rockefeller 100 years ago?”

I’d rather be me. Between the internet, healthcare, cars, planes, etc, I’m way richer than Rockefeller, because despite all that money, he couldn’t begin to buy those things. So society has gotten much richer, and the disparity between me and Bezos is smaller than between me and Rockefeller. Also, I don’t have to really be worried about dying from the flu. Rockefeller did - even a simple infection could kill him, but unlikely to kill you or me.

Re: Taxation of Carried Interest

#196

Post by lisper » Sun, Jun 10, 2018, 3:34 PM UTC

treis wrote: post #182

jdhn wrote: post #179

Earlier quoted context omitted.

Because if they were taxed, municipalities would see their interest rates skyrocket. Having municipal bonds be free of taxation benefits the investor (they don't pay income tax), the municipality (more people will be interested in the bonds, hence lower interest rates), and the citizens of the municipality (their tax rates won't go up as quickly).

Seems like a wealth transfer from municipalities that don't borrow heavily to those that do.

That's true, but you seem to imply that this is a bad thing. It's not. A municipality that does not borrow must either tax its current citizens to raise the money to pay for capital expenditures, or stop investing in infrastructure. Neither option produces vibrant economies, particularly in a country where people are relatively free to move.

Re: Taxation of Carried Interest

#197

Post by bingoboingo33 » Sun, Jun 10, 2018, 3:41 PM UTC

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…

The correct solution is to eliminate income-based taxes altogether, be they corporate, individual, derived from regular wages or derived from capital gains, etc ... and stick to a flat consumption based tax. But we're so deep down the rabbit-hole of our current system, we can't even imagine doing that.

Without going to that level of simplicity, it's worth noting that some countries have done away with capital gains altogether and are doing perfectly well socially. That would be a perfect first step.

Re: Taxation of Carried Interest

#198

Post by JetSpiegel » Sun, Jun 10, 2018, 3:48 PM UTC

chii wrote: post #171

phkahler wrote: post #158

Earlier quoted context omitted.

A hundred times this. If your plan is make money by selling at a higher price, you're playing the greater-fool game. If you make your return via dividends, it is a direct reflection of the value of the company.

but how does that system allow for a company that re-invest all profits into growing, if doing so is a tax disadvantage? selling at a higher price is how investors "get out" of the game, but allow other investors to "take over the reigns", all without the company having had to pay out dividends at inopportune times.

> but how does that system allow for a company that re-invest all profits into growing, if doing so is a tax disadvantage?

Use your own money to gamble. Once you accept shareholder's money, you play by their rules.

If you are not paying dividends, register as non-profit.

Re: Taxation of Carried Interest

#199

Post by rpedela » Sun, Jun 10, 2018, 3:58 PM UTC

bingoboingo33 wrote: post #197

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…

The correct solution is to eliminate income-based taxes altogether, be they corporate, individual, derived from regular wages or derived from capital gains, etc ... and stick to a flat consumption based tax. But we're so deep down the rabbit-hole of our current system, we can't even imagine doing that. Without going to that level of simplicity, it's worth noting that some countries have done away with capital gains a…

If we are going to massively simplify taxes, then it needs to be done on the richest rather than the poor like a consumption tax does. By rich, I don't necessarily mean rich individuals. The richest entities in society are businesses and they benefit the most when you or I have money in our pockets.

If you think about it, the most common federal tax on individuals or families, income wage taxes, is in fact a revenue tax on businesses just like the payroll tax. A business has to pay an employee more to cover that employee's income and payroll taxes.

If we are going to replace all taxes with one tax, I would like to see a simple, flat business revenue tax. This has a few benefits. First, businesses already pay revenue taxes and individuals don't have to worry about taxes. Companies like Amazon cannot behave like a non-profit to avoid taxes. Individuals will have more money in their pockets to spend which helps business make more money. We could probably excempt small businesses and/or startups and still generate enough tax revenue. A revenue tax would also double as a consumption tax except it is only the richest that have to pay it.

Re: Taxation of Carried Interest

#200

Post by bingoboingo33 » Sun, Jun 10, 2018, 4:08 PM UTC

rpedela wrote: post #199

bingoboingo33 wrote: post #197

Earlier quoted context omitted.

The correct solution is to eliminate income-based taxes altogether, be they corporate, individual, derived from regular wages or derived from capital gains, etc ... and stick to a flat consumption based tax. But we're so deep down the rabbit-hole of our current system, we can't even imagine doing that. Without going to that level of simplicity, it's worth noting that some countries have done away with capital gains a…

If we are going to massively simplify taxes, then it needs to be done on the richest rather than the poor like a consumption tax does. By rich, I don't necessarily mean rich individuals. The richest entities in society are businesses and they benefit the most when you or I have money in our pockets. If you think about it, the most common federal tax on individuals or families, income wage taxes, is in fact a revenue…

"If we are going to massively simplify taxes, then it needs to be done on the richest"

Why? This is a built-in assumption most people seem to be operating with and I've never understood the rationale that the rich should pay more.

Does a rich person wear roads out more than a poor one? And if they do, wouldn't it be better if they paid for how much they wear the road down? As in: a percentages of miles driven on it? As in: a consumption-based tax?

Anyhow, even if you decide to work with that flawed premise, to me, if we're going to tax revenue, then "fair" translate to a very simple mathematical concept: fixed-rate.

Everyone pays 10% tax on their income. This way, the "rich" pay more, and the "poor" pay less. Because 10% of 1M is 100k and 10% of 100k is 10k.

Fairness handled.