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Taxation of Carried Interest

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Re: Taxation of Carried Interest

#281

Post by Retric »

bzbarsky wrote: post #252
Retric wrote: post #218

Earlier quoted context omitted.

Alternatively, investments should have much higher tax rates. If someone invested money then they clearly did not need it, thus they need returns even less. Really, you can try to justify any tax policy by reframing the question, but the root argument breaks down to having other people pay more so I pay less which is never really justified.

This is an incredibly anti-savings policy, given that we have central banks ensuring positive inflation (except in Japan) and capital gains are calculated in nominal, not real terms. In other words, if you just hold some money for a few years and it doesn't lose value (interest rate equals inflation), you _already_ owe tax on it. That's just broken. If we did capital gains in inflation-adjusted dollars, the situation…

The world is flush capital which is driving down returns. We don't need to try and increase it as people with a surplus are always going to invest it.

Re: Taxation of Carried Interest

#282

Post by conanbatt »

closeparen wrote: post #271
rpedela wrote: post #258

Earlier quoted context omitted.

I think you and I fundamentally disagree on what a tax is. You seem to view it as punishment or a burden. I view it as the method for paying for things that help the collective good. Not a punishment but rather a duty for those with the means. If we aren't using taxes to collectively protect society (e.g. military, police, courts), help the less fortunate, etc then why collect them at all? The richer the entity (indi…

You're responding to a technocratic argument about how to allocate taxes equitably with a moralistic argument that taxes are good. From a meta-debate perspective this is both infuriating and tragically common. Details matter. Incentives matter. "Taxes are actually good" isn't a reason to stop caring about which taxation schemes produce the best outcomes or are more fair. "Punishment" carries some unnecessary connotat…

Great way to say it.

Re: Taxation of Carried Interest

#283

Post by conanbatt »

rpedela wrote: post #262
conanbatt wrote: post #259

Earlier quoted context omitted.

> think you and I fundamentally disagree on what a tax is. You seem to view it as punishment or a burden. I view it as the method for paying for things that help the collective good. Not a punishment but rather a duty for those with the means. If we aren't using taxes to collectively protect society (e.g. military, police, courts), help the less fortunate, etc then why collect them at all? The richer the entity (indi…

> taxation is a cost on the person paying for it, and will have the same effects to him as if the person lost the taxed money into the abyss. In my town, in addition to the normal local taxes, there is a special greenery fee/tax that all residents must pay. It is only $25/year. The purpose is to pay the upkeep of all the green spaces which there are many. I happily pay this because I like to walk through these green…

If you are happy to pay for it, why do you need it to be a tax? You can pay your government directly.

Unless you want other people to pay for it, of course.

Re: Taxation of Carried Interest

#284

Post by conanbatt »

sjwright wrote: post #272
rpedela wrote: post #262

Earlier quoted context omitted.

> taxation is a cost on the person paying for it, and will have the same effects to him as if the person lost the taxed money into the abyss. In my town, in addition to the normal local taxes, there is a special greenery fee/tax that all residents must pay. It is only $25/year. The purpose is to pay the upkeep of all the green spaces which there are many. I happily pay this because I like to walk through these green…

And while we all would prefer greater efficiency in government, an inefficient government is still universally preferable to an absent or non-functioning government. Also, if that inefficiency is in the form of salaries or domestic spending, it's only partly wasted as it adds to movement of money in the economy.

God no. The broken window fallacy comes back from 1830, before Bastiat.

If you pay someone to do nothing you waste both the money you used that could have gone to something useful and the time of the person that would have done something else, hopefully productive, instead.

Re: Taxation of Carried Interest

#285

Post by stealthmodeclan »

kisstheblade wrote: post #131
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…

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

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

Labor produces guaranteed income atleast in the west.

But investing capital doesn't.

How else do you incentivize risk taking?

Re: Taxation of Carried Interest

#286

Post by rpedela »

closeparen wrote: post #271
rpedela wrote: post #258

Earlier quoted context omitted.

I think you and I fundamentally disagree on what a tax is. You seem to view it as punishment or a burden. I view it as the method for paying for things that help the collective good. Not a punishment but rather a duty for those with the means. If we aren't using taxes to collectively protect society (e.g. military, police, courts), help the less fortunate, etc then why collect them at all? The richer the entity (indi…

You're responding to a technocratic argument about how to allocate taxes equitably with a moralistic argument that taxes are good. From a meta-debate perspective this is both infuriating and tragically common. Details matter. Incentives matter. "Taxes are actually good" isn't a reason to stop caring about which taxation schemes produce the best outcomes or are more fair. "Punishment" carries some unnecessary connotat…

Okay but why is it sloppy? Saying the true cost is on consumers, etc is a start but it is not a full argument. How do you know where the true cost lies? And like the other commenter, you seem to think a tax is a cost/disincentive which it is but there is a positive side too. Morality or not there is a benefit to taxes which many purely economic arguments on HN ignore.

In other words, the true cost may be on individual people. But so is the true benefit. So would taxing solely corporations have more cost or benefit for those people? Both for the people in the corporations and those without? I have yet to see a coherent, let alone persuasive, argument against the idea.

Re: Taxation of Carried Interest

#287

Post by rpedela »

conanbatt wrote: post #283
rpedela wrote: post #262

Earlier quoted context omitted.

> taxation is a cost on the person paying for it, and will have the same effects to him as if the person lost the taxed money into the abyss. In my town, in addition to the normal local taxes, there is a special greenery fee/tax that all residents must pay. It is only $25/year. The purpose is to pay the upkeep of all the green spaces which there are many. I happily pay this because I like to walk through these green…

If you are happy to pay for it, why do you need it to be a tax? You can pay your government directly. Unless you want other people to pay for it, of course.

That is what a tax is and how it is levied. The people in the town agreed via voting to levy the tax so that we could all collectively benefit. I am sure some people disagreed but that is democracy.

Re: Taxation of Carried Interest

#288

Post by namibj »

closeparen wrote: post #268
namibj wrote: post #134

Earlier quoted context omitted.

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 Preisnachlä…

It's easy to fudge and difficult to investigate whether employee use of company assets/funds is actually compensation or actually for business purposes. I'm a software engineer. My company assigns me a Macbook Pro and iPhone with data plan to do my work, use 2-factor auth, and answer PagerDuty. It doesn't make any effort to stop me from using these devices as my personal daily drivers. Anecdotally, my coworkers do. I…

You certainly have a good point. There is quite some room, sure, but not enough for full-scale blatant abuse.

Now, to the classification of your travel to the satellite office. Here in Germany your employer has to keep records of sufficient detail to show the iirc. customs office (as they are assigned to keep an eye on this, as far as I remember), that you did not work more than 10 hours on any single day, and not more than 8 hours per workday on average over usually 3 months. So the time after those 8/10 hours are not work, and the tax office doesn't care much about where you spend your time off after work. Sure, it's a nice job (if you don't have a family), if you fly business class around to all the little satellite offices for just 8 hours or work, possibly even staying the weekend (as it is cheaper to stay than to fly you back home, which should be the point where it counts as compensation for taxes, e.g., the additional cost of the hotel, compared to flying you back and forth, would be counted as compensation).

The champagne you drink on the flight, at least as far as it costs more than water, should/would count as compensation. The nicer seat shouldn't, because the increased comfort isn't really a material benefit. If they pay you a nicer seat than they can explain with less of a productivity hit, they might themselves need to argue differently for why they paid for it, when they themselves get an audit. And while I don't know the IRS, I assume they compare the compensation listed by the employer with that listed by the employee. So this would be noticed, and the IRS might well claim tax fraud. Sure, not everyone cares, but this should give them enough to go after blatant abusers.

Re: Taxation of Carried Interest

#289

Post by bzbarsky »

Retric wrote: post #281
bzbarsky wrote: post #252

Earlier quoted context omitted.

This is an incredibly anti-savings policy, given that we have central banks ensuring positive inflation (except in Japan) and capital gains are calculated in nominal, not real terms. In other words, if you just hold some money for a few years and it doesn't lose value (interest rate equals inflation), you _already_ owe tax on it. That's just broken. If we did capital gains in inflation-adjusted dollars, the situation…

The world is flush capital which is driving down returns. We don't need to try and increase it as people with a surplus are always going to invest it.

I agree there's a problem there: we seem to have more capital than we need, yet we also have less savings (in the sense of people deferring consumption) than individuals need to have a comfortable retirement, for example.

I have yet to see good solutions for this problem.

Re: Taxation of Carried Interest

#290

Post by Frondo »

WalterBright wrote: post #235
Frondo wrote: post #193

Earlier quoted context omitted.

"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.

Wealthy people have often funded very valuable research that the government had no interest in: 1. rockets 2. radar 3. jet engines Government research is directed by politics, which usually means safe, non-controversial topics, and money directed at politically connected scientists. There's nothing "efficient" about that.

Privately funded research is directed by one person's politics, which is far, far less good than the politics of a democratic state.

Or maybe you trust rich folx to call the shots? I don't. The world's moved on from monarchy.

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