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Tim Sweeney: Tax bill would likely end founder control of independent companies

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Re: Tim Sweeney: Tax bill would likely end founder control of independent companies

#21

Post by dsizzle »

maerF0x0 wrote: post #4

I'm actually in favor of this. I've long held that there should be public liquidity in all companies over a certain valuation and the company should not be allowed to bar you from selling the stock (though it could retain right to beat any pending offers) It's asinine that companies are allowed to treat equity pay as pay, and IRS can tax it as realized (AMT), but the worker does not in fact have any instrument with w…

He could also himself shares with super-voting power, like what Facebook and Google have done.

Re: Tim Sweeney: Tax bill would likely end founder control of independent companies

#22

Post by lavezza »

maerF0x0 wrote: post #4

I'm actually in favor of this. I've long held that there should be public liquidity in all companies over a certain valuation and the company should not be allowed to bar you from selling the stock (though it could retain right to beat any pending offers) It's asinine that companies are allowed to treat equity pay as pay, and IRS can tax it as realized (AMT), but the worker does not in fact have any instrument with w…

Somehow I think Elon giving himself a multi-billion dollar salary to cover a jump in Tesla stock would upset a lot of people.

Re: Tim Sweeney: Tax bill would likely end founder control of independent companies

#23

Post by jonas21 »

RNCTX wrote: post #13
wod3m wrote: post #10

Earlier quoted context omitted.

if you start a company you should be able to continue to own that company until you decide you're ready to sell it

There are no mom and pop store billionaires.

I'm not sure what you mean by this, but Walmart started as a mom and pop store, and the Walton family maintains majority ownership to this day.

Re: Tim Sweeney: Tax bill would likely end founder control of independent companies

#24

Post by xbar »

new_realist wrote: post #6

The current tax situation is like property taxes in California before Prop 19: nobody sells, so ownership and control never changes. This facilitates wealth transfer from generation to generation (in the equity case, though the use of trusts) and perpetuates wealth inequality.

This is the kind of myopic reading of the law that will curtail entrepreneurial endeavors and lead to corporate-only wealth.

Re: Tim Sweeney: Tax bill would likely end founder control of independent companies

#26

Post by randyrand »

DLTADragonHawk wrote: post #7
kinghajj wrote: post #2

It looks like Epic Games is a private company, so from what I understand in the proposal, this wouldn't affect him, since his shares are not publicly tradable. The proposal might affect him when/if he were to sell any shares, though, since it has a provision to accrue tax liability on illiquid assets like art/etc, to be owed at time of sale.

From what seems to be the intention of the tax plan it would be regardless of if the asset was available in a stock exchange so if the value of Tim's shares put him above the threshold he would still have to pay the tax. His wealth through epic would likely be less then if it were a publicly traded company though. The effect of paying tax on shares was always true as it becomes a realized capital gain and is already…

He could also attempt to sabotage the company's valuation in an attempt to maintain control.

As long as he has no legal fiduciary duty, it seems like an obvious thing to do. It's definitely what I would do.

And in 4 more years the new tax laws could be anything.

Re: Tim Sweeney: Tax bill would likely end founder control of independent companies

#27

Post by xbar »

randyrand wrote: post #18

It will also add very odd incentive to not grow your company after you reach the billionaire tax-level. A. you'll maintain ownership B. you wont have to pay taxes on the gains Tons lot of founders care about 'A' a lot more than is "rational". It sounds okay, but the USA will miss out on a lot of potential wealth and tax revenue from people who choose not to grow their companies into huge multinational corporations.

It is hard to overstate the harm this will do to entrepreneurial enterprise as a result of these anti-growth incentives.

Re: Tim Sweeney: Tax bill would likely end founder control of independent companies

#28

Post by hellbannedguy »

new_realist wrote: post #6

The current tax situation is like property taxes in California before Prop 19: nobody sells, so ownership and control never changes. This facilitates wealth transfer from generation to generation (in the equity case, though the use of trusts) and perpetuates wealth inequality.

You mean old middle class, and poor homeowners, can stay in the house they raised a family in?

The only reason my high school educated 80 years old mother in declining health can stay in a home, and county, she feels somewhat safe is because of prop 13.

Her biannual property taxes are still a big deal when they arrive.

I've said this before, but I'm beginning to think if you didn't live through the craziness before Prop 13, you won't ever quite get it.

Prop 13 has been the only blessing most homeowners have been given.

If you want to put income limits on the gift of prop 13 fine, but doing away with it completely would be evil. By income limits I mean the guy making $600,000/year, and a huge bank account, could probally still survive without prop 13 protection.

The 80 year old lady, or man, surviving on 1/2 widower's blue collar pension is another story.

(I'm for means testing on all programs. I'm also for tieing all societal fees/fines---speeding tickets, registration, patent fees, etc. to 1040 income/assets wealth.)

Re: Tim Sweeney: Tax bill would likely end founder control of independent companies

#29

Post by nicoburns »

randyrand wrote: post #18

It will also add very odd incentive to not grow your company after you reach the billionaire tax-level. A. you'll maintain ownership B. you wont have to pay taxes on the gains Tons lot of founders care about 'A' a lot more than is "rational". It sounds okay, but the USA will miss out on a lot of potential wealth and tax revenue from people who choose not to grow their companies into huge multinational corporations.

Smaller companies may be a net benefit over the long term. These super large companies tend to become over dominant in their markets and and start engaging in anti-competetive behaviours.

Re: Tim Sweeney: Tax bill would likely end founder control of independent companies

#30

Post by fhrow4484 »

> It doesn’t apply to shares held by hedge funds like KKR, nor to corporate investors like Tencent and Sony.

If that's the case, then what prevents billionaires like him from creating "Tim Sweeney angel fund LLC" and have that entity retain control of Epic?

Then since this entity is private, couldn't it defer that tax at the time it sells the entity?

With the whole deferred tax scheme that applies to assets not traded on an exchange, i.e. a "deferral charge meant to replicate interest payments on taxes that went unpaid each year, together totalling a tax capped at 49%" as described in https://www.rollcall.com/2021/10/27/wyden-details-proposed-t...

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