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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

#311

Post by hn_throwaway_99 »

sailingparrot wrote: post #196
hn_throwaway_99 wrote: post #127

This proposal seemed utterly reasonable to me, especially this: > US budget deficits don’t require a radical confiscation scheme like this. We already have a very effective progressive tax system which applies the same rules - but different rates - to everyone. If tax revenue is too low, just raise the top tax brackets That, together with closing the step-up-in-basis loophole, are the simplest ways to more equitably…

The issue is that many billionaires effectively have zero revenue. For example, Elon's salary at Tesla is 0$ per year. So you can increase the top bracket all you want, they won't pay more. Instead they get liquidity through loans backed by their shares, on which they of course have no tax. I agree that taxing based on unrealised gains is not a good solution, but I don't see how raising the top bracket solves that ei…

People keep using this example, but it doesn't really make sense. If you take out a loan against the value of your increased shares, then you still have to pay that loan back eventually, and when you do, you have to pay tax on whatever you liquidate to get the funds to pay back the loan (in addition to paying interest on the loans). This is literally how all loans work.

The one loophole here is that if you don't pay your loans back until you die, then your heirs have to pay back the loan. But there is a special "step up in basis" provision where your heirs wouldn't have to pay capital gains tax on the rise in the value of your shares (but you would). Close that loophole and then you'd have a fair system.

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

#312

Post by wolverine876 »

TameAntelope wrote: post #303
wolverine876 wrote: post #255

Earlier quoted context omitted.

> if it seems to justify the spending for something totally unrelated Income taxes pay for almost everything; should they only pay for things related to income? I don't understand that.

Technically only half [0]. And my point is I would expect something more thought through than trotting out each legislator's favorite pet taxation overhaul. A few days to consider amongst the options doesn't really seem like enough time, but I guess we're still talking about "a framework" so there will be more time. They're not attempting to pass any of this right now. [0] - https://www.taxpolicycenter.org/briefing-b…

The options have been considered and developed for years, decades even. There should be public debate, but these aren't new ideas that some novices are pulling out of a hat.

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

#313

Post by mithr »

WalterBright wrote: post #257
ncallaway wrote: post #189

Earlier quoted context omitted.

I think their point is that you can have a strong leader that doesn't have control of the company through ownership mechanism. Steve Jobs at Apple is a perfect example, since it was a publicly traded company that Steve Jobs didn't control. However, he was still able to be an extremely effective leader as the CEO.

He had de facto control. Nobody was able to successfully defy him. He used this control to force his vision upon Apple. No committee would have done what he did.

That's... not the point at all? This post is about a law that (to Sweeney's claim) would force founders to sell their controlling stock. This law wouldn't affect "de facto" control of a company -- it would affect actual stock-driven control of a company. The fact that Jobs did not have stock-driven control of Apple, and yet he was still able to "force his vision upon Apple" as you said, would make him a good example of why this law could be effective, since this law would not have affected Jobs' control of Apple.

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

#314

Post by necovek »

mandevil wrote: post #296
gruez wrote: post #256

Earlier quoted context omitted.

>- Remove step up in cost basis on inheriting assets. my impression is that the step-up cost basis is there because you've already paid the estate tax when the assets were transferred to you? otherwise you'd end up getting double-taxed.

I buy stock at price A and sell, it later, at price B. Assuming B > A, (if it isn't this is a whole different thing) then I am taxed on the gain the stock made, I pay tax on the value of (B-A). On the other hand, I do have all of the (B-A) cash, which is nice. (Or as my tax professor once said, it's always better to have more money rather than less, and to die later rather than sooner.) Now let's say I still buy the…

> If you aren't, then what you notice is that somehow this death has created a situation where the government never got it's cut of that (B-A) difference, so this is avoiding taxes.

While capital was transferred, value increase was never really monetized. Would it not be fair to say that it will be taxed only once it turns into money, against the B-A gains, and A is taxed according to normal inheritance rates.

Of course, this has a huge practical issue of knowing what A was, which could be a while back.

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

#315

Post by Ericson2314 »

scythe wrote: post #235
rsj_hn wrote: post #151

Earlier quoted context omitted.

> My whole point was that this is not necessarily true, and depends on the form the spending takes place. Did you miss that? Nope, I didn't miss it, because it's not relevant. Giving money to poor tenants ends up in the pocket of landlords. Letting poorer people buy iPhones ends up in the money of shareholders and is realized as an increase in Apple stock price, etc. When you have a small group of the people dispropo…

>Nope, I didn't miss it, because it's not relevant. Giving money to poor tenants ends up in the pocket of landlords. Letting poorer people buy iPhones ends up in the money of shareholders and is realized as an increase in Apple stock price, etc. That's a little extreme. It's fair to argue that giving money or benefits to poor people may not directly reduce inequality. More importantly, since progressive taxes do redu…

Yeah really simply, if absent enough taxes, money "pools" to the rich and doesn't keep on circulating, that also means the rich aren't spending it. By definition.

If so....then what's the problem?

One possible answer is "well, the Rich have more risk tolerance, so they can just summon a catastrophe to improve their relative standing in a negative-sum situation with little pain" I think that's a fair argument. Do MMT, and the rich try to sabotage undoing global warming so they can rule the roost in some max max situation sure. But such analysis means we have to broach Solvency vs Liquidity as PP didn't want to. A UBI-empowered workforce can also more and safely easily go after the rich with pitchforks and shear numbers, strike at the plants that arm their body guards, not treat them when they are sick in the hospital.

Keynes and Marx disagreed on many things, but did agree on C-M-C vs M-C-M. In regular-enough times, firms are slaves to nominal values: boost aggregate demand and they will not be able to able to boycott and resist. But also, workers are not slaves to rich people's unspent inert savings if empowered by means external to private emplyment. "Nominal dollar power" works better on the former than the latter.

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

#316

Post by WalterBright »

artdigital wrote: post #155
fernandotakai wrote: post #20

Earlier quoted context omitted.

> 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. agreed. that should 100% be a taxable event and it's totally absurd that it's not. and i'm sure there's a lot of... lobbying that will never allow that kind of law to pass.

I kinda disagree. Yes it's a loophole to get around tax, but taking a loan against assets you own should not be taxable. It's the same pathway that people use to take a loan against their property and other assets, and having to pay tax on that is absurd Similarly, stocks (or things like gold) that one owns have some worth, and using it as collateral for taking a loan against it is a completely valid thing to do

> Similarly, stocks (or things like gold) that one owns have some worth, and using it as collateral for taking a loan against it is a completely valid thing to do

It's how the entire banking system works. Taking out loans against collateral deposited in the bank.

People also take out a loan every time they use a credit card. Is that income, too?

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

#317

Post by ncallaway »

WalterBright wrote: post #257
ncallaway wrote: post #189

Earlier quoted context omitted.

I think their point is that you can have a strong leader that doesn't have control of the company through ownership mechanism. Steve Jobs at Apple is a perfect example, since it was a publicly traded company that Steve Jobs didn't control. However, he was still able to be an extremely effective leader as the CEO.

He had de facto control. Nobody was able to successfully defy him. He used this control to force his vision upon Apple. No committee would have done what he did.

Right, that's exactly my point!

It's possible to be CEO, and exert control over a company without literally owning >51% of the voting shares.

A good leader can "control" a company without having legal control over it. That's exactly the point about Steve Jobs.

The assertion is that: It is possible to be a dictatorial executive CEO, without having 51% of the voting rights of the company. This is the corollary of "losing control of the voting rights of the company doesn't automatically imply that the company must be run by committee". Steve Jobs proves both of those assertions to be true.

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

#318

Post by [deleted] »

flurben wrote: post #309
IG_Semmelweiss wrote: post #231

Curious. Doesn't this open up the possibility of debt slavery of the entrepreneur, to the government ? If my stock in my biotech startup goes thru the roof and i get taxed X, i could perhaps sell some stock to cover. More likely, though, I will get into an installment plan with the IRS since the gains are so massive its going to be tough to sell so much stock without a discount, to pay the IRS off. Next year, FDA doe…

Yes, you're reading this wrong. Referring to tax obligations as "Slavery" is disconnected from reality, and pretty insulting to all the Americans for whom real, actual American slavery is still impactful.

[deleted]

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

#319

Post by WalterBright »

adam_arthur wrote: post #294
gruez wrote: post #256

Earlier quoted context omitted.

>- Remove step up in cost basis on inheriting assets. my impression is that the step-up cost basis is there because you've already paid the estate tax when the assets were transferred to you? otherwise you'd end up getting double-taxed.

I need to read more into that. If true, the cost basis should only be stepped up such that it accounts for the estate tax. I'd prefer some simpler overall approach though. Removing step up in cost basis alone obviates the need for an estate tax, as eventually assets would be sold and tax revenue generated. But important to do some research into how often inherited assets are kept permanently and gains never realized…

> thus tax never paid

The estate tax is still due. The federal estate tax is 40%.

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

#320

Post by refurb »

adam_arthur wrote: post #248

It'd be pretty easy to levy completely fair and progressive tax structure that only directly impacts the wealthy, and is sufficient to cover the spending. - Tax capital gains >1m a year as regular income. - Fix loopholes that allow for equity as collateral for perpetual loans without ever selling the underlying. - Remove step up in cost basis on inheriting assets. - Tax stock buybacks at same level as dividends. - Do…

This won't cover the spending at all. Not even close.
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