California plan for wealth tax on anyone who spends 60 days a year in the state • Hacker News Board

Re: California plan for wealth tax on anyone who spends 60 days a year in the state

#201

Post by robocat » Sat, Dec 19, 2020, 4:43 PM UTC

GavinMcG wrote: post #118

ryan_j_naughton wrote: post #88

Earlier quoted context omitted.

> but it’s not totally absurd to think you owe something to a country whose citizenship you continue to benefit from Yes it is honestly. The US is the only G7 county (and one of the only countries worldwide) to engage in extraterritorial taxation. It is absurd. If you are gaining from services in that country, you should pay taxes to that country. If you have moved abroad and aren't gaining from any services if that…

> Because you are effectively not a member of that community anymore People have the choice of giving up their U.S. citizenship. > Yet simply to retain the right to return the US at some point, they must pay taxes every year in the middle? Yes? Or do we allow everyone who isn't participating in our society as a citizen would to come and go as they please?

> People have the choice of giving up their U.S. citizenship.

Sure, but if you have more than $2MM assets then you must pay an exit tax.

From: https://1040abroad.com/faq/renouncing-u-s-citizenship/

“The Exit Tax that you, as a covered expatriate, would have to pay is calculated as if you have sold all of your assets at Fair Market Value on the day prior to your relinquishment, and the associated capital gains are subject to this tax. The Internal Revenue Code provides that the first $699,000 of this capital gain will not be taxed. The tax payment is due within 90 days after giving up your U.S. citizenship. Expatriation is considered to be effective for tax purposes, even if you fail to file the Expatriation Information Statement (form 8854). The exceptions from the main rule are certain deferred compensation items, specified tax deferred accounts, and non-grantor trusts.”

“You can still become taxable in the U.S. under the normal U.S. tax rules if you continue to have U.S.-sourced income.”

Re: California plan for wealth tax on anyone who spends 60 days a year in the state

#202

Post by da_big_ghey » Sat, Dec 19, 2020, 4:43 PM UTC

sdenton4 wrote: post #126

GhostVII wrote: post #96

Personally I disagree with the whole idea of wealth taxes, you should be taxed when you do things, not taxed just because you own something worth money. I should be able to go live in the woods alone and not have the government take some percent of my net worth just because I exist. I mean I don't have a tonne of sympathy for people with tens of millions of net worth, but it just seems wrong in principle. If I start…

/Personally I disagree with the whole idea of wealth taxes, you should be taxed when you do things, not taxed just because you own something worth money./ I figure if we allow passive income, we should allow passive taxes...

Capital gains taxes are already a thing. You just pay on liquidation instead of having to come up with cash every year.

Re: California plan for wealth tax on anyone who spends 60 days a year in the state

#203

Post by throwaway2245 » Sat, Dec 19, 2020, 4:44 PM UTC

beagle3 wrote: post #123

throwaway2245 wrote: post #32

This proposal is 0.4% tax on wealth above $30m. The Dutch equivalent is 1.6% tax on wealth above €1m. The number of Ultra High Net Worth Individuals in the Netherlands is still increasing.

The Dutch tax from cursory reading is not comparable - apparently, if you pay wealth tax, you are exempt from capital gains tax; also, if your wealth is real estate outside of the Netherlands, it is not taxed. It may be more comparable to Norway’s wealth tax, which is 0.85% of everything above 200K€ (With some provisions for primary residence and illiquid shares IIUC, discounting these somewhat) A Norwegian tax profe…

That's a fair critique. I understand the Dutch tax replaces capital gains with a fixed amount based on your total wealth (not your gain). So a fair comparison with California should probably include an additional amount for California's CGT.

They present it in the Netherlands as if you are paying 30% "capital gains" tax on an assumed-fixed gain of 5.28%, your actual gain becoming irrelevant under this system. You also pay this earlier - annually, not at the point of realising the profit.

Overall, the Dutch total tax on wealth is still going to be considerably higher.

Re: California plan for wealth tax on anyone who spends 60 days a year in the state

#204

Post by Straw » Sat, Dec 19, 2020, 4:44 PM UTC

GhostVII wrote: post #96

Personally I disagree with the whole idea of wealth taxes, you should be taxed when you do things, not taxed just because you own something worth money. I should be able to go live in the woods alone and not have the government take some percent of my net worth just because I exist. I mean I don't have a tonne of sympathy for people with tens of millions of net worth, but it just seems wrong in principle. If I start…

Personally, I disagree with the whole idea of income taxes. You should be taxed for owning things, because the government enforces your property rights, not just for labor, for which the government doesn't directly contribute at all. I should be able to earn money for my labor without the government taking a fraction every time it moves around. Even if you move to the woods, you're still taking military protection from the surrounding government- even if you somehow avoid using any other service like roads, public education, etc.

I don't understand this widespread belief that you have a right to permanent ownership. Someone has to enforce that ownership, and that has costs. What does seem wrong in principle is taxing transfers of money, which are virtually free with modern computer systems, not to mention the increased economic friction in the labor market.

You raise a good point with liquidity. Personally, I wonder, how could we set up a system of fractional ownership that delays repossession in such cases? Of course, if you never pay tax on that heirloom, then you'll eventually lose a controlling interest- and I think this makes sense, especially for fundamentally limited resources like land.

Re: California plan for wealth tax on anyone who spends 60 days a year in the state

#205

Post by jamiltron » Sat, Dec 19, 2020, 4:44 PM UTC

emteycz wrote: post #137

Pfhreak wrote: post #132

Earlier quoted context omitted.

Profits are just unpaid wages. He bought labor for less than it was worth and pocketed the excess.

That means the workers will have absolutely no problem founding their own business and there is no need to tax Bezos.

That's not what that means at all. Founding a business requires a significant investment of capital.

Re: California plan for wealth tax on anyone who spends 60 days a year in the state

#206

Post by gfxgirl » Sat, Dec 19, 2020, 4:45 PM UTC

carlio wrote: post #181

WillPostForFood wrote: post #157

Earlier quoted context omitted.

because of 0.4% If California was well run, clean, and had otherwise lower tax, then .4% might be easy to ignore. But if you’re already on the fence, and not happy with things, and have been talking to real estate agents in Seattle, Austin, Miami, or Singapore, then this just the kick in the butt you might need to go through with leaving.

Local governance running well, public services like cleaning, helping homeless etc, all require tax dollars. Saying "I'd pay tax if they had enough money they get from tax to fix the problems that cause me not to want to pay tax" seems like it's a bit of a chicken-egg problem.

San Francisco spends $50k per homeless person. The problem doesn't seem like it's money

Re: California plan for wealth tax on anyone who spends 60 days a year in the state

#207

Post by ryandrake » Sat, Dec 19, 2020, 4:45 PM UTC

hartator wrote: post #56

moralsupply wrote: post #48

This is probably the first HN thread in 2020 where the majority of the posts complain about taxes as opposed to be supportive of them.

It hits home for them. Not an abstract “rich” category anymore.

Wait, you mean that many HN readers have net worth of $30 million or over, and therefore they are personally worried about it? I'd guess 99.5% of commenters here will never be subject to this tax in their entire lives. And even if they barely make it above the threshold, say they have $31,000,000 net worth: That results in a tax liability of a whopping $4,000. Whoop-dee-doo.

The anti-tax rants here are just the usual run-of-the-mill white-knighting for wealthy people.

Re: California plan for wealth tax on anyone who spends 60 days a year in the state

#208

Post by geofft » Sat, Dec 19, 2020, 4:45 PM UTC

GhostVII wrote: post #96

Personally I disagree with the whole idea of wealth taxes, you should be taxed when you do things, not taxed just because you own something worth money. I should be able to go live in the woods alone and not have the government take some percent of my net worth just because I exist. I mean I don't have a tonne of sympathy for people with tens of millions of net worth, but it just seems wrong in principle. If I start…

> Or another example, I own a piece of art or a car passed down through my family that is worth 30 million dollars (maybe it's a mclaren f1 or something).

There is no meaningful reason that a society should want you to inherit a piece of art or a car from your ancestors. (The only practical one is that the sorts of families who can pass down expensive art also control society.)

You didn't work for that art or car; you simply had the fortune to be born into a family with one. Every single reason why it is unjust for someone to inherit a government role applies here. If you don't think King James the Nth should rule simply because King James the N-1st did, why do you think James Jr. should have 30 million dollars in financial power simply because James Sr. did?

Just like hereditary rule, hereditary property breaks the fundamental relationship between work and reward that is common to any functional society. If you work hard and get a spare $30M to buy a car, sure, whatever, we can say you were incentivized to work hard and produce $30M of value. But if you work hard and give your kid $30M, how is your kid incentivized to do anything?

And the argument that well-off parents have an inherent right to make their kids' lives easier leads directly to the correlation between class and race/caste. If it's moral for me to make my children better off than others' children, who is to say it's immoral for me to make my nieces and nephews several times removed better off, too? Who is to say it's immoral to make all the people in this town who came from a certain ancestral lineage better off?

And on top of all that, it usually doesn't even work. We associate "nepotism" with waste and corruption, not just distasteful behavior, because we understand those who are chosen because of their family relationships generally aren't more qualified than the rest of the candidates. Even at the smallest scales, when you hear stories of the CEO's college-age kid getting an internship, it's almost always the case that the child has not inherited any particular talent, and in fact is probably less talented than would be needed for the job.

Parents should be allowed to provide for their children to set them up for adulthood - they should be able to pay for housing and food and clothing and education. When they can't, society should step in to help them, and we're almost there: we have welfare programs and private charities for basic needs, free public education, and (at least among private colleges with sufficient endowments) full need-based financial aid. Parents should not be able to do more than that, in a society that prizes democracy and equality over the natural superiority of certain families.

Re: California plan for wealth tax on anyone who spends 60 days a year in the state

#209

Post by tsimionescu » Sat, Dec 19, 2020, 4:45 PM UTC

nthj wrote: post #156

tsimionescu wrote: post #106

Earlier quoted context omitted.

> If I start a company and it gets valued at 30 million dollars, why should the government be allowed to force me to sell my company to pay their wealth tax? How is the government forcing you to sell your company? They're forcing you to pay 0.4% of the money you own over those 30M dollars in tax, but that's it. Do you truly believe that there are people who make less than 0.4% per year profit on their >30M assets?

edit: as tsimionescu kindly pointed out below, I misunderstood the 30M threshold. My reasoning seems correct to me but a key premise was wrong, and I agree the proposal is much less onerous than I have painted below: I personally know multiple startup founders worth $10-$20M on paper who made $120K/year salary for years (or still are.) It’s hardly unusual, startup valuations are high these days, and VCs and the found…

First of all, if I understand correctly, if they are worth less than 30M$ they aren't affected by this tax at all. This alone I think invalidates some of your comment altogether.

So the tax actually says that a founder owning 40% of a $100M valuation would have to $40k per year (0.4% of the 10M that they own over the base 30M0). By your calculation, they would have to pay themselves ~$200k per year to afford that, which would be ~0.5 employees for a company that can afford ~16 (simply doubling your numbers for employees and halving the increases because of the half tax).

This doesn't seem like such a horrible onus on a corporation. Now, if the valuation is wildly off, then perhaps there will be bigger problems - but that would also mean that this law gives better incentives for correct valuations of companies, a win in itself.

Re: California plan for wealth tax on anyone who spends 60 days a year in the state

#210

Post by admiralspoo » Sat, Dec 19, 2020, 4:46 PM UTC

adjkant wrote: post #111

Trisell wrote: post #95

Earlier quoted context omitted.

I think your premise that they will experience French Revolution like consequences is overlooking the fact that unlike the 1700s. Up and taking your money to another country that still likes you is the click of a mouse and a private jet flight out. So no they won’t capitulate to higher taxes of earlier times. They will just leave. Like they already are at the threat of it.

Maybe a percentage will, but I think when people are trying to guess and assume what these people will do as "rational economic agents", they miss the human factors. No one is going to pick where they go to college based on the taxes on the ultra-rich unless they are obsessed with money. Once rich, are you going to uproot yourself entirely from any family, friends, and connections in the US? You have to consider that…

Plenty already have. Eric Schmidt, for example, is now a citizen of Cyprus

https://www.seattletimes.com/business/rich-americans-increas...