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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

#201

Post by Anon1096 »

opportune wrote: post #181
gfodor wrote: post #166

Earlier quoted context omitted.

That doesn’t make any sense, presuming you meant “collateralize.” I put up $100k of stock for a $100k loan, I do nothing, turn around and pay the money back, and now I have a tax bill? If I repeat this process, I can have an infinite tax liability with no realized gain or net income. Am I missing something?

The “repeating the process” is entirely the problem. If you perpetually roll over your loans you are able to spend large amounts of money without ever realizing a cent of it, thus never paying taxes (since your estate would end up paying it but then financial trickery makes the realization there non taxable). It would be easy to avoid this infinite tax liability by not taking out an infinite amount of loans…

The problem here is with the step up in cost basis upon death, not getting loans against unrealized shares.

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

#202

Post by xbar »

WalterBright wrote: post #165
mikem170 wrote: post #146

Earlier quoted context omitted.

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…

Extracting the money from them will mean less investment. It's simple mathematics. You take away a billion from an investor, then a billion is not invested. Even worse, you're taking the money away from the most effective investors.

Exactly this. And even worse, you are disincentivizing the most effective leaders from driving their companies to huge success.

It eliminates the risk to established entities to be disrupted.

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

#203

Post by saltcured »

satyrnein wrote: post #94
hellbannedguy wrote: post #28

Earlier quoted context omitted.

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 P…

What seems odd to me (if I understand it correctly) is that prop 13 keeps your property tax low, but you still get the full benefit of the appreciation in price when you sell the property. It kind of seems like if it's artificially keeping the tax low, the full tax bill should come due at some point, which would logically be at the change of ownership.

Property tax is the recurring value tax, kind of a wealth tax while you hold a property, and prop 13 does shield much of the appreciated value from this. A new homeowner might be paying 1-2% of market price per year, while an elderly neighbor might pay 1-2% of an assessed value that is closer to a market value from 20+ years ago. The assessment does increase at a very slow rate, and in larger jumps with remodeling or other improvements.

At the sale, the appreciation becomes realized as capital gains income. There are some rules making a portion of gains tax-exempt for a typical homeowner, but the remainder of a large appreciation is taxed as income. There can also be a sales/transfer tax on the transaction, which is of a comparable rate to the annual property tax rate.

The third significant event is inheritance, where the house could pass to an heir without a sale and have its basis updated to current value. This is when the appreciated gains can really go untaxed.

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

#204

Post by megaman821 »

mywittyname wrote: post #174
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…

> How many fourth generational heirs do we see among America’s wealthiest billionaires? Essentially zero. Quite a few. Not sure how long you would make four generations, but let's say 100 years. There are the obvious famous families; Ford, Rockafellers, Du Pont, Mellon, Mars, Hearst, SC Johnson ("a family company"), etc. But there are a number of billionaire families that aren't recognized much outside of their "home…

So at least on this list, https://www.forbes.com/forbes-400/, the vast majority do not have families that been on the list (or would have potentially been on the list if it existed 100 years ago) for 4 generations.

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

#205

Post by novok »

rsj_hn wrote: post #87
threeseed wrote: post #81

Earlier quoted context omitted.

This is simply nonsense. All companies once they reach a certain size (including Tesla, SpaceX) have a Senior Leadership Team which decides on the critical decisions affecting the company. This personality obsession is really only perpetuated by people who haven't worked in business and don't realise just how much of a team effort it is.

The thing is, it's really critical to have that dictator CEO in charge of the company to reign in the senior leadership, otherwise what happens is the creation of fiefdoms and intra-oligarchic turf battles at the expense of overall success. Someone on this site mentioned Pournelle's Iron Law of Bureaucracy: https://en.wikipedia.org/wiki/Jerry_Pournelle#Pournelle's_ir... And the CEO is the counterweight to that oligar…

I've been in companies that became founder led to professional CEO led, and you can see the difference in how effective a company is. I think there is great shareholder value also in founder led companies too, which have led to the growth of some of the largest and most successful companies in the world. When gates left microsoft was probably the begining of the company becoming somewhat irrellevant. Apple, tesla, epic, facebook, google, etc are all great examples of this.

There is a really great possibility that america shoots it's future economic growth in the foot with something like this, just because it's future superstars companies are not led by their great founders.

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

#206

Post by dsizzle »

quickthrowman wrote: post #171
dsizzle wrote: post #21

Earlier quoted context omitted.

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

Companies don’t do this anymore because S&P and other index creators will refuse to add your company to their indexes if you have multiple share classes. It’s much better to be part of an index than to retain founder control, for shareholders. https://www.ft.com/content/993e4c11-8729-3168-a280-69e1d400b...

The price boost from being added to the S&P is temporary and small (~5%) https://www.investopedia.com/terms/s/spphenomenon.asp

The person controlling the company potentially has a much greater and longer lasting influence on the stock price!

Epic isn't going to be part of the S&P when it's private anyway, so obviously that's not a top concern for Sweeney.

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

#207

Post by pwinnski »

coenhyde wrote: post #72

Bad idea to tax unrealized capital gains. Proposal; How about we gut our entire tax code and replace it with a single tax that taxes when money moves from one entity to another. Let's call it a Transaction Tax. It would replace Sales Tax, Income Tax, Capital Gains Tax, Inheritance Tax, etc and introduce tax on debt creation (when the bank gives you the money). This would close all loop holes and put the entire tax in…

Does the tax apply when money moves from one entity I control to another entity I control?

If so, that's clearly a problem.

If not, that's definitely a different set of problems.

Everything seems simple at first, and then it isn't. Every change in taxation rewards some behaviors and punishes others. Either your proposal would result in more tax revenue or less, either of which is a problem for someone, Maybe many someones.

The most obvious issue with the tax structure you describe--aside from who controls which entities--is that it is one of the most regressive tax policies I can imagine. Those at or near the poverty line would now be paying a percentage of everything they earn, while those earning far more would be paying that percentage on only a small subset of their earnings. Considered another way, while this seems mathematically equal, it's most burdensome on those with the least ability to afford it.

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

#208

Post by dsizzle »

yodon wrote: post #135
dsizzle wrote: post #15

Earlier quoted context omitted.

Actually, why wouldn't the Epic's of the world just issue themselves shares with super voting power, like what Facebook and Google did. That would address the concern in his tweet.

You only get to do that if you're printing money at such an astounding rate that investors will do anything to get you to let them invest in you. FB and Google, yes, most other companies, not so much.

Lots of companies do it, most of which are not as dominant as FB and Google https://www.cii.org/files/3_17_17_List_of_DC_for_Website(1)....

It only really requires that shareholders trust the owners of the special class shares.

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

#209

Post by belltaco »

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…

A twitter reply says this:

>I think everyone needs to read the bill and calm down. "Gains on private assets -- including harder-to-value assets like real estate, art and private companies -- would escape the annual levy, and only be taxable when sold. "

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

#210

Post by JumpCrisscross »

TameAntelope wrote: post #119

Okay, doesn't it feel crazy that we're just throwing ideas out there and if it seems to justify the spending for something totally unrelated, it'll have a reasonable chance of becoming literally the highest law of the land? Maybe it's because I'm not in the room, but this feels incredibly slapdash for something so incredibly important.

> we're just throwing ideas out there

This language was proposed by Wyden at least two years ago, and has gone through multiple rounds of refinements. (For example, the original text didn’t exempt private assets.) It’s not unrelated because income taxes are how we pay for general expenses in this country. (Granted, limiting it to billionaires always struck me as a way to make it palatable for a lower, e.g. $10mm, threshold.)

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