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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

#361
post #328

Earlier quoted context omitted.

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…

> government never got it's cut of that (B-A) difference because the person who should be paying that cut is dead! You don't tax the dead.

Why don't we tax the dead? Seriously, they aren't going to object! Why shouldn't we?

Who we tax, and what way, is entirely a choice made by a society. I routinely pay sales tax out of the income that I paid income tax on, and pay extra tax when I buy alcohol- those are all decisions made by society that they were the socially correct way to pay for everything we jointly need as a society. That's all taxes are.

The modern estate tax was created in 1916. In 1906, then President TR gave a speech supporting this kind of tax as a way to try and reduce the power of dynastic wealth- to keep American society from being ossified, and to make sure that the current generation of talented people could amass wealth too.

The modern income tax was created in 1909 as part of an attempt to clear the way for prohibition- a significant part of the Federal budget was paid for with alcohol taxes, and they needed to replace that hole in the budget[1]. For the first three decades it hit only a tiny percentage of the richest, until World War Two when it was expanded and covered a greater percentage of the population, as the Federal government massively expanded and needed more money to pay for its massive size[2].

But those were all the results of political choices, and taxing the dead makes just as much sense.

[1]: Similarly, women's suffrage was also, at least in the US, largely a proxy battle over prohibition- it seems to have been a widely held assumption of everyone in politics in 1910 that as soon as women's suffrage was achieved prohibition would follow immediately afterwards (in fact, prohibition passed two years before women's suffrage). This is why the largest anti-suffrage organization had as its honorary chairwoman Mrs. Adolphus Busch, matriarch of the Budweiser fortune.

[2]: Adam Tooze's book _The Deluge_ has as its basic thesis that the US Government was too small, and had too limited state capacity, which was a major cause of all of the problems of the 1920's and 1930's.

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

#362

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…

> Epic Games is a privately held company, and not traded on established securities markets or readily available on secondary markets.

So this law would lead to a proliferation of privately held companies as billionaires avoid the stock market and other tradable covered assets?

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

#363

Earlier quoted context omitted.

For now. Tomorrow is you paying capital gain on your home each year. What happen to be able to deduct inflation from capital gains?

Today, you pay property taxes based on some assessed value of your home every year, and in most municipalities, your home gained value. You're already paying tax on the gain in value of your home, what would be so different about paying tax on the gain in value of other illiquid, capital holdings?

So if you make improvements to your house over the course of a year, and/or the property value in the region goes way up, you could face an unpayable tax bill and lose your house. I don't have much sympathy for renters complaining about gentrification, but property tax laws like this are hot garbage.

Sounds like a great way to import rich people and exploit poor people by capping their level of home value.

Thanks for all that hard work on the house, sorry it's getting repo'd and auctioned. Next time, don't try to make a place to live so high quality!

Property tax should be paid on square footage of the boundaries. Impose a property sales tax with progressive residency penalties or some other extractive mechanism, but have the common decency to let people invest in and improve their own homes.

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

#364

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…

For now. Tomorrow is you paying capital gain on your home each year. What happen to be able to deduct inflation from capital gains?

You already pay property taxes on your property each year. It is a non-trivial percentage of the house's value (~1% where I live).

Property taxes are also essential tools against speculation, since your asset naturally depreciates, and the more you bid it up, the more you pay (as a counter example where speculation rules the day because property taxes are absent, see China).

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

#365
post #328

Earlier quoted context omitted.

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…

> government never got it's cut of that (B-A) difference because the person who should be paying that cut is dead! You don't tax the dead.

> You don't tax the dead.

Why not? If someone owes a bunch of taxes when they die, their estate should still be on the hook for it. I don't see any reason that money owed to the government should go to someone's heirs instead just because they happened to die at a specific time

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

#366

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…

> - Tax capital gains >1m a year as regular income.

It sounds fair, but aren't lower capital gains taxes used to encourage investment? And if we get rid of that incentive on income > $1 million (at least, can they still offset losses?), then would that lead to some adverse consequence (like much lower investment overall as direct income generation becomes preferred at that point)?

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

#368

Earlier quoted context omitted.

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 cou…

Taxing the B-A gains when they are sold, even after death, is what people mean by "eliminating the stepped-up basis" as the original poster suggested doing. At present, when a heir inherits at B they pay estate tax at B, but then if they sell at price C they only pay tax on (C-B).

As for knowing what A is, if you don't know it you can always fill in 0 and pay slightly more tax than you should, to be safe, so you don't caught in an audit. As of 2011 the IRS requires all brokers to track and report the cost basis for all purchases- that is, any purchase made after 2011 when you sell it they will tell you and the government what the value of A should be.

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

#369

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.

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…

[deleted]

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

#370

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…

> - Tax capital gains >1m a year as regular income. It sounds fair, but aren't lower capital gains taxes used to encourage investment? And if we get rid of that incentive on income > $1 million (at least, can they still offset losses?), then would that lead to some adverse consequence (like much lower investment overall as direct income generation becomes preferred at that point)?

I would guess not much reduction in investment. If you have 100m dollars, there's only a limited number of places you can put it. What are you proposing re: direct income generation?

It will lead to reduced liquidity though. E.g. holders of assets are likely to sell less frequently to avoid the higher tax burden.

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