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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

#351

Post by brightball »

bradgessler wrote: post #327
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…

Another problem with taxing unrealized capital gains is that if the gov’t wants to collect more tax revenue, they could print money, inflate the dollar value of assets, then tax the gains.

Basically what’s happening right now?

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

#352

Post by gonehome »

wolverine876 wrote: post #272
gonehome wrote: post #42

Earlier quoted context omitted.

I think the law is bad, but if we had a sane center-right party we wouldn't be in this situation. We're missing a liberal center and it's not found in either party, many (myself included) think the stuff like denying the election results are higher risk so I'm forced to vote against them on that alone. I mostly agree otherwise re: innovation (though think the southern border is not that relevant).

> We're missing a liberal center The White House and most of the Democratic party are centrists.

I think Biden is a pretty moderate Obama style neo-liberal, but that's not really true of Elizabeth Warren, Bernie Sanders, or a lot of representatives in congress.

I'm happy Biden won and I voted for him (well I voted for Bloomberg in the primary before it was obvious who would win and then Biden in the general), but it was looking scary there for a while. The democratic party is definitely more moderate compared to republicans (where all but a tiny handful are just trump loyalists), but that's a pretty low bar - they still have a lot of policies I don't like in addition to the woke stuff. Obviously this is a super flame-bait topic probably not good for HN so I'll leave it here. I just wish there could be principled discussion and legislating without tribal craziness. America is healthier with two reasonable parties to balance each other out.

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

#353

Post by PaulDavisThe1st »

WalterBright wrote: post #322
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…

> Why should capital gains get favorable tax treatment over income Because the income has already been taxed when it was the corporation's profit.

Even if I was to buy that there's some theoretical argument that no dollar may be taxed more than once (which I don't), the income isn't the capital gains. It's not related in any way to the capital gains. A corporation may have enormous profits, and zero capital gains. It may have enormous capital gains, and zero profits. The capital gain has not been previously taxed.

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

#354

Post by PaulDavisThe1st »

narrator wrote: post #238
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…

The idea of this is that private control of companies by independent minded founders should not exist. Only large financial companies like Vanguard and Blackrock should own large stakes in public companies. The practical effect is not to raise more tax revenue, it's to seize control from founders and give it to the financial oligarchy by forcing them to sell. This is what happens in Russia, Eastern Europe, Saudi Arab…

No, it's not. Plenty of other people in the thread have explained the contigencies in the legislative text that mean that Sweeney's claims about it are at best misleading and at worst outright wrong.

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

#355

Post by bryanlarsen »

hellbannedguy wrote: post #28
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 P…

Your mother could easily pay higher property taxes with a home equity line of credit. She probably should also be using that HELOC to fund a more comfortable lifestyle -- she probably needs that money more than her heirs do. (I'm assuming, given that you're posting on HN).

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

#356

Post by PaulDavisThe1st »

gruez wrote: post #256
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…

>- 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.

You don't pay estate taxes in 2021 unless the estate is worth more than US$11.7M

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

#357

Post by PaulDavisThe1st »

adam_arthur wrote: post #335
WalterBright wrote: post #319

Earlier quoted context omitted.

> thus tax never paid The estate tax is still due. The federal estate tax is 40%.

I was saying, in a world without an estate tax. If you could remove estate tax and cover by removing step up in cost basis, is probably preferable (but contingent on assets eventually getting sold, requires some research)

For almost every US person, it IS a world without an estate tax. Nobody pays that in 2021 without an estate worth more than US$11.7M

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

#358

Post by PaulDavisThe1st »

Dracophoenix wrote: post #300
BigJono wrote: post #234

Earlier quoted context omitted.

So why would he uproot his entire life that he's happy with to move somewhere with a slightly lower tax rate when he can still support his relatively modest lifestyle a thousand times over?

If the United States accepts a federal wealth tax, moving to a low tax state like South Dakota or Alaska won't help. And despite what you imply in your last statement, owning a successful business isn't just limited to how much money it makes. Few people just give up the sum of their life's work or accept others' taking away from it. Just because others believe that the Warren Buffets of the world have achieved "enou…

Buffet has aggressively written about and commented on the need for higher taxes on people like himself.

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

#359

Post by luxuryballs »

ncallaway wrote: post #325

I think the comments here miss a couple of factors. First, and primarily, Tim Sweeny states: "If this tax scheme had been place, I’d have been forced to liquidate nearly my entire ownership." This is absolutely false. The proposed law (legislative text available here: https://www.finance.senate.gov/chairmans-news/wyden-unveils-... ) would not apply the tax scheme to Epic Games. At all. See Section 491, which applies…

“This significantly reduces the amount of shares he would have to liquidate to cover his take burden.”

Well dang I’m so relieved that it’s a measurably less severe amount of bullshit.

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

#360

Post by rsj_hn »

flurben wrote: post #258
rsj_hn wrote: post #159

Earlier quoted context omitted.

The thing is, it is really foolish to make economic policy based on what, as the economist Brad deLong likes to call our East African Plain Ape brain, thinks of as fair. That's just atavistic sentiment. If you run an economy based on these types of emotions, you will end up with a terrible economy in which people are worse off. Instead, we want to make economic policy based on what will do the most good, not what we…

Modern societies are not capital constrained, so capital formation is superfluous. The world is awash in excess capital among the rich, so providing government subsidies to facilitate further capital formation among the rich will not improve living standards. What you're describing is the failed mentality of the early 1980's : the idea that the wealthy are "better" at capital allocation than everyone else. What it le…

> Modern societies are not capital constrained, so capital formation is superfluous

So modern economies are not constrained for money, since money is just paper you can print.

But we are not talking about financial capital, but real capital. E.g. entrepeneurs taking big risks to start businesses instead of just getting some cushy sinecure. And the problem is that although the government can print money, Elon Musk can't. He has to risk his own money and his own time, in order to place big bets. He is the one working 14 hour days, creating new fields, while everyone else tells him it's a crazy idea that will never work.

As you start to punish those people and become angry at them for succeeding (ignoring the massive survival bias) they start saying screw it, and don't make those big bets, or move to a different country and place big bets there.

And it is the ability to organize production in innovative ways that is scarce in the society, not paper and ink to create money. So we should focus our economy on rewarding and encourgaging that type of entrepeneurship, and fostering the growth of productive ecosystems, because that creates the surplus wealth that gives value to the government's paper and ink.

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