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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

#381

Post by moneywoes »

throwawaylinux wrote: post #378
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…

The bigger point it misses is that this will never pass, at least not without massive loopholes allowing the ultra wealthy backers of these politicians to pay practically nothing. It's a stunt. The people voting for it will be able to claim they've been struggling with all their might to go after the capitalist fatcats, and the people voting against it will be able to say they've protected you from communists, and th…

Yep, unfortunately it is all theater

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

#382

Post by SirSourdough »

jurassic wrote: post #247
SirSourdough wrote: post #148

Earlier quoted context omitted.

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...

There are millions of millionaires in the US. A lot of fairly normal doctors, lawyers, and engineers will reach this bar by late middle age if they're saving and investing part of their income.

Very cursory search suggests 8% of US adults are millionaires according to CNBC. That means there's something like 300 million non-millionaires compared to 30 million millionaires.

The rate of "billionaire hate" would need to be astronomically higher among millionaires than non-millionaires for millionaires to make up any sort of the majority of people complaining about income inequality.

On top of that, NPR polling suggest about 45% of top 1% income earners on up to about 65% of low income earners (>$35k household) are concerned about income inequality, which flies in the face of the idea that it's mostly jealous millionaires complaining up. A majority of every income segment in America other than the top 1% believes this is a problem.

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

#383

Post by shalmanese »

crystalmeph wrote: post #350
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 My take on this is that the capital gain was not actually generated all in one year, but by taxing it as ordinary income, you are putting it into a higher bracket as though it were all generated in one year. As an example, say your father builds a successful company, and runs it well for 40 years before selling it for $10 million and retiring. By taxi…

It's in a higher bracket but you're also deferring paying. Given the choice of paying $1 of tax today or paying $N of tax later, that $1 of deferred tax at a 7.18% return is worth $2 in 10 years, $4 in 20 years and $16 in 40 years.

At a 6% rate of return and a 25% tax rate, after 40 years, even a 100% deferred tax rate is financially preferable to a 25% immediate tax rate, ie: I make more from the interest on my deferred tax than on my entire principle.

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

#384

Post by ncallaway »

chuckee wrote: post #371
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…

> Epic Games is a privately held company, and not traded on established securities markets or readily available on secondary markets. But suppose it were publicly held, with Sweeney holding majority ownership. Why would that distinction make his criticism of this tax scheme invalid? It seems to me his criticism is still perfectly valid, it only applies to a smaller set of companies.

Yes, but the strength of the criticism is really dependent on the number of companies that it applies to.

If his criticism applied to every company and every founder in the country, it would be devastating and the law shouldn't be considered at all.

If the criticism would affect the control of only a single company, then it's a much smaller concern.

So, saying: "this criticism is quite a bit smaller in scope than it was being presented as" is a significant change.

> Why would that distinction make his criticism of this tax scheme invalid?

I didn't say his criticism was "invalid". I said that one factual claim he made was wrong (which it was), and that the commenters here were overlooking some of these mitigating factors.

It doesn't mean we should entirely ignore the concerns that he raised, but I think we should evaluate those concerns in a complete and measured way. By the same token, I don't think raising a "valid" criticism also totally dooms the proposal. It's possible that there are other mitigations we can apply, but fundamentally every tax structure has to balance the good with the bad. We need to decide if the benefits of the structure outweigh the downsides.

Is it possible that this tax scheme would require the founders of some companies to sometimes sell shares to cover their tax burden? Yes, it's possible.

Is it possible that the amount of shares those founders would have to sell could impact their control over the company? Yes, it's certainly possible.

How many companies that are founder controlled will be forced to no longer be founder controlled because of this tax scheme? Based on the legislative text, I suspect it's a very small number and might be 0, but I grant that it may not be 0.

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

#385

Post by conk »

narrator wrote: post #310
flurben wrote: post #302

Earlier quoted context omitted.

The goal of the legislation is to shift the tax burden towards high net worth individuals, and away from wage-earners. Raising cap gains rates and/or increasing top marginal income tax rates are not very effective ways to achieve this goal.

If you have high net worth that means you have control, not that you are necessarily living lavishly. If you want to pay for personal expenses and buy yachts and the usual kinds of things that socialist complain about, you need to take that out in income or through capital gains. Thus, they want to pay for everything by forcing founders to sell control to the country's financial oligarchs like Blackrock and Vanguard…

Or get a loan at a very low rate using equity as collateral thereby avoiding income/cap gains.

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

#386

Post by WalterBright »

PaulDavisThe1st wrote: post #357
adam_arthur wrote: post #335

Earlier quoted context omitted.

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

The figure is $2,193,000 for Washington State. Considering that even starter houses are over a million bucks here, I bet that sweeps in quite a bit more than "nobody".

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

#387

Post by WalterBright »

whakim wrote: post #306
WalterBright wrote: post #295

Earlier quoted context omitted.

There are indeed. And those countries wound up repealing them because of the disastrous effects.

Most evidence suggests that wealth taxes levied in the past have indeed reduced inequality and have not led to the type of tax avoidance their detractors would suggest.

The WSJ points out:

"Complexity is one reason European countries, including France, Germany and Sweden, abandoned broad-based wealth taxes. Many of the rich dodged wealth taxes by exploiting carve-outs or moving. The very rich will find ways to avoid confiscatory taxes, but bad tax policy distorts investment. Sweden abolished its wealth tax in 2007 following an exodus of capital and business tycoons. France repealed its net wealth tax in 2018, estimating that some 10,000 people with 35 billion euros worth of assets had left in the previous 15 years for tax reasons. The government was losing revenue from income taxes that the wealthy would have paid."

https://www.wsj.com/articles/the-democrats-wealth-tax-mirage...

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

#388

Post by PaulDavisThe1st »

WalterBright wrote: post #377
PaulDavisThe1st wrote: post #349

Earlier quoted context omitted.

Almost nobody pays the estate tax. >When a person dies, their assets could be subject to estate taxes and inheritance taxes, depending on where they lived and how much they were worth. While the threat of estate taxes and inheritance taxes does exist, in reality, the vast majority of estates are too small to be charged a federal estate tax—which, as of 2021, applies only if the assets of the deceased person are worth…

> applies only if the assets of the deceased person are worth $11.70 million or more And hence they apply to billionaires, which is the topic of this page.

Actually most billionaires manage to reshuffle their assets to that their estate, such as it is, is under the limit by the time they die. The main people hit by it are those holding large amounts of valuable land, and there are very few of them.

Almost all mentions of the estate tax in this thread has been generic whining about the fact that there is an estate tax. For almost all US persons, there is no estate tax.

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

#389

Post by WalterBright »

bskrobisz wrote: post #290
WalterBright wrote: post #93

Earlier quoted context omitted.

If you own your house, is it unfair that you don't share it with all the people who contributed to building it? Or is it fair that you paid them what they asked for their efforts?

This is not really the point that I'm arguing--my point would be that if you wanted your house entirely encrusted in precious jewels, each of which was individually polished by a team of people paid 50 USD an hour to do this weekly, nothing stops you from making that decision even though you are monopolizing a large quantity of resources for status, almost entirely. Someone with a large amount of wealth is generally…

There's been a surge in real estate values lately. I've yet to see any homeowner decide they owe part of that gain to the people who built the house or the folks who mow their lawns.

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

#390

Post by PaulDavisThe1st »

WalterBright wrote: post #386
PaulDavisThe1st wrote: post #357

Earlier quoted context omitted.

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

The figure is $2,193,000 for Washington State. Considering that even starter houses are over a million bucks here, I bet that sweeps in quite a bit more than "nobody".

... with rates at most half the 40% being cited here for federal estate tax.

State policies differ, indeed. Almost all discussion of estate taxes in this thread has focused on or been exclusive to the federal estate tax.

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