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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

#141

Post by over_bridge »

rsj_hn wrote: post #106

Some observations: 1. Whatever happened to increasing tax rates, like pretty much every other country? Why these weird gimmicks? 2. A much greater cause of elite wealth accumulation is running deficits. Deficits are when you want to spend on social welfare but don't have the courage to pay for it with taxes. So you make both sides happy and increase spending while running up deficits. The reason we've seen this astro…

Why would a billionaire leave the US? There they are like gods with services to cater to their every whim. Nowhere else in the world will roll out the carpet for big money like the US does (excluding maybe Monaco and other small states). I just see 3 as a false assumption, as any country they 'flee' to will have higher taxes anyway.

I live in New Zealand and a billionaire here can have a lot of land but otherwise we just don't have the infrastructure to support that ultra high end lifestyle. They would basically be average people with nice toys and a big house here.

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

#142

Post by mardifoufs »

DennisP wrote: post #107
dsizzle wrote: post #21

Earlier quoted context omitted.

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

Is it possible to do that after taking outside investment? I always assumed share classes like that had to be set up at the beginning.

Almost everything is possible you manage to get the other shareholders to agree. That might happen when some early investors sometimes want the founder to have more control especially before going public. The theory is that you'd rather have a founder you invested on in the first place steering the company than let your generic wallstreet shareholder without a vision(tm) take over a unicorn still full of promise.

Sometimes the bet pays off, very very well. Take for example Musk. You can say whatever about him, but it's extremely clear he has a vision, and does pretty much anything to get there. I'm not sure tesla or spacex would've survived 2018 with someone else at the helm or if a shareholder revolt happened. Just by that metric he is already worth dozens of billions to the rest of the shareholders.

Zuck is also a good example of investors trading off votes for a more wall st. independant, steadier long term eadership.

Now keep in mind those are exceptions. Having supervoting shares orbmultiple classes of shareholders is very often not a good thing and usually leads to less value being generated.

Accountability to shareholders is usually good and very important to ensure sane corporate governance. Which is why CEOs and founders absolutely love having ever less powerful shareholders and we end up in situations like now where even the crappiest IPO has absurdly overgeared supervoting classes. Who doesn't want to buy in a deeply in debt, cash burning ipo with very questionable growth who's founder has a perpetual 80% of the votes?

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

#143

Post by jldugger »

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 facilitates wealth transfer from generation to generation

Well, arguably it's the step up in basis that enables generational transfer without taxation.

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

#144

Post by ameetgaitonde »

WalterBright wrote: post #86
threeseed wrote: post #65

Earlier quoted context omitted.

I fail to see how. Entrepeneurs aren't going to not build a company because of some specific tax treatment that only applies whilst they are wildly successful.

Taking away the money, though, will cripple their ability to grow the companies. No SpaceX, no Tesla, no iPhone, etc.

A tax on personal unrealized capital gains will not take away any money from the company. It's privately-held, and has no effect on a company's balance sheet.

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

#145

Post by posguy »

sneak wrote: post #136
losvedir wrote: post #129

Earlier quoted context omitted.

Curious to know what up and coming industries you mean?

Cryptocurrencies, advanced semiconductors, and cheap per-passenger rail/aircraft. USA is winning on rockets and EVs but that is 100% because of one person and not wider US policy (and I assume most of his production of the latter will be non-US within 5 years).

Samsung (South Korea), TSMC (Taiwan) and Intel (US, Israel) locate their fabs in small countries that are heavily dependent on the US for ensuring their neighbors do not attack.

Two of those three (TSMC & Intel) are building fabs in Arizona due to political pressure, hefty subsidies and geological stability of the area (reducing the number of defects in chips).

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

#146

Post by mikem170 »

WalterBright wrote: post #86
threeseed wrote: post #65

Earlier quoted context omitted.

I fail to see how. Entrepeneurs aren't going to not build a company because of some specific tax treatment that only applies whilst they are wildly successful.

Taking away the money, though, will cripple their ability to grow the companies. No SpaceX, no Tesla, no iPhone, etc.

I don't follow your reasoning, either. Do you really think that a new tax on several hundred billionaires will discourage the hundreds of thousands of entrepreneurs that are out there, that a significant amount of them will not bother since they can only make a few hundred million before they have an extra 15% of their money collected in taxes?

Most entrepreneurs would be overjoyed to be a billionaire and have to pay that extra 15%. Seems like they'd be the lucky ones. Seems like a billionaire or an aspiring billionaire complaining about such a thing would be pretty weird.

The parent you replied to mentioned wealth being locked up to avoid capital gains taxes. There are other pros and cons, I'm sure. Do you think this new tax on billionaires means that less people will be trying to become multi-millionaires?

Note that I'm not happy with the current tax system, and this seems like another kludge. I also don't know that we need to coddle or incentivize wealth maintenance, it's not an end in and of itself.

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

#147

Post by dragonwriter »

movedx wrote: post #134
dcolkitt wrote: post #77

Earlier quoted context omitted.

Except there’s a 40% estate tax still levied at each generation. Plus unlike European aristocracy, American plutocrats rarely intermarry. Even if you’re only reproducing at replacement, your wealth gets diluted by 50% each generation. Stack the two and you’re getting slashed by 80% every generation. Don’t take my word for it. How many fourth generational heirs do we see among America’s wealthiest billionaires? Essent…

There are ways around this in the UK system, however. It's probably the same case in the US. The short of it is you transfer the wealth well before (15-20 years) the death occurs, thus there is no inheritance. This was used recently by an MP. That being said I agree with your thoughts, however: > How many fourth generational heirs do we see among America’s wealthiest billionaires? Essentially zero. This is probably t…

> There are ways around this in the UK system, however. It's probably the same case in the US. The short of it is you transfer the wealth well before (15-20 years) the death occurs, thus there is no inheritance.

So, you pay gift taxes instead.

Unless you use fake business transactions.

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

#148

Post by SirSourdough »

zarkov99 wrote: post #111
sbuttgereit wrote: post #100

Earlier quoted context omitted.

Because it fails to sate the emotional rationalization that sits behind so much of the rhetoric that has been used to justify such measures. The wealthy are evil, duplicitous, exploitative, and in the best cases, merely lucky... regardless of what a wealthy person actually did or didn't do to come to their wealth... and the not wealthy are blameless, innocent, unlucky victims that are unable to change their lot in li…

You are not wrong. The only thing I would add to that is the wealthy invariably means simply "much richer than me". In particular it is obscene to see that the people who most hate billionaires and agitate for their punishment are, for the most part, millionaires. The whole movement is rooted in envy, transparently disguised as virtue.

I highly doubt the majority of people agitating against billionaires are millionaires. There aren’t enough millionaires for that to be likely. And I think there are lots of good arguments being made about the detriments of income inequality if you don’t dismiss the people making them as envious out of hand...

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

#149

Post by anigbrowl »

WalterBright wrote: post #69
anigbrowl wrote: post #11

Well, one workaround would be to treat securitization of shares (eg for a loan) as a taxable event. This is a common (and currently legal) tax avoidance strategy. Another consideration is that maybe having sole control of a massive pot of cash or financial instruments by an individual is just a Bad Thing. Consider how Zuckerberg structured FB so that while he it's a public company, the bulk of the stock is non-voting…

I doubt SpaceX or Tesla would exist if they were controlled by a committee. Doing great things usually requires control by a single person who is able to say "screw it, we're going for X".

I'm in sympathy with that argument, but I don't think that singularly driven people are motivated by profit alone, and that they'll stop if there's some change is the underlying property ownership calculus.

Also, it's worth considering that not everything great is good, so perhaps a braking or governance system (in the sense of an engine) is worth requiring on any enterprise sufficiently large to become a juggernaut.

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

#150

Post by flurben »

rsj_hn wrote: post #106

Some observations: 1. Whatever happened to increasing tax rates, like pretty much every other country? Why these weird gimmicks? 2. A much greater cause of elite wealth accumulation is running deficits. Deficits are when you want to spend on social welfare but don't have the courage to pay for it with taxes. So you make both sides happy and increase spending while running up deficits. The reason we've seen this astro…

Taxing incomes and not wealth is fundamentally unfair to people without wealth.
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