Tim Sweeney: Tax bill would likely end founder control of independent companies • Hacker News Board

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

#391

Post by rsj_hn » Thu, Oct 28, 2021, 4:40 AM UTC

PaulDavisThe1st wrote: post #388

WalterBright wrote: post #377

Earlier quoted context omitted.

> 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.

> Actually most billionaires manage to reshuffle their assets

I was talking to some people sufficiently wealthy that this is a concern, and their point is that the only reason some don't transfer their assets like this is fear of their own children. Unless you really are a farmer, or small business owner, the estate tax is completely optional if you trust your kids.

In 2019, there were only 2,570 estate taxes filed.

> Almost all mentions of the estate tax in this thread has been generic whining about the fact that there is an estate tax

There is also whining among people that they need to spend so much on accountants and lawyers to avoid what is essentially a completely bypassable tax.

So you can see how socially it is not a good use of our human capital to create this enormous tax avoidance industry, and how it would be much better to pass laws that didn't need to do things like value privately held businesses or artwork in order to determine your tax liability.

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

#392

Post by PaulDavisThe1st » Thu, Oct 28, 2021, 4:40 AM UTC

WalterBright wrote: post #375

PaulDavisThe1st wrote: post #353

Earlier quoted context omitted.

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.

The value of a corporation is inevitably linked to its profits.

Not really. Amazon, a company I once knew a bit about, showed gigantic growth in stock value with minimal or zero profit. This is hardly a new story.

But it wouldn't matter anyway, given GP's point. Taxes on corporate income are not taxes on the capital gains of those who hold corporate stock.

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

#393

Post by whakim » Thu, Oct 28, 2021, 4:40 AM UTC

WalterBright wrote: post #387

whakim wrote: post #306

Earlier quoted context omitted.

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…

Sure, some people will move their assets around in order to avoid wealth taxes (to which there are, of course, solutions). That being said, in France revenue from the wealth tax grew at more than twice the rate of GDP from 1990-2018. Which means that even though some people were avoiding the tax, and oversight was extremely lax, there's no evidence that it was being serially evaded. And this is in the context of the European Union, perhaps the most hostile environment to wealth taxes that you can imagine given the free flows of people and capital.

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

#394

Post by WalterBright » Thu, Oct 28, 2021, 4:42 AM UTC

chii wrote: post #338

WalterBright wrote: post #299

Earlier quoted context omitted.

That happened to a friend of mine in the US. He had a "taxable event" when his stock options vested. By the time the tax bill was due, his stock was worthless, and he went bankrupt. He lost his home and last I saw was living in an RV.

That's a different situation. Stock options are the same as having a cash payment, which is then immediately used to purchase the stock. It's correct to tax stock options when they vest. > By the time the tax bill was due, his stock was worthless if you could not afford the tax bill with free cashflow, you need to sell to cover. Not selling means you're taking the tax debt owed, and gambling it on stocks. It sucks th…

He did not realize that he would owe income taxes on the difference between the option price and the value of the stock the day he bought it. He thought the option price would be his basis and he'd owe capital gains when he sold the stock.

That was the way things used to be, but Congress had changed the rules.

Quite a few people have been caught unawares by that.

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

#395

Post by PaulDavisThe1st » Thu, Oct 28, 2021, 4:42 AM UTC

rsj_hn wrote: post #391

PaulDavisThe1st wrote: post #388

Earlier quoted context omitted.

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.

> Actually most billionaires manage to reshuffle their assets I was talking to some people sufficiently wealthy that this is a concern, and their point is that the only reason some don't transfer their assets like this is fear of their own children. Unless you really are a farmer, or small business owner, the estate tax is completely optional if you trust your kids. In 2019, there were only 2,570 estate taxes filed.…

If there are taxes, there's a tax avoidance industry. I mean, c'mon, there's a gigantic tax avoidance industry just for regular income tax.

The proposed law under discussion here explicitly excludes privately held businesses and artwork.

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

#396

Post by WalterBright » Thu, Oct 28, 2021, 4:44 AM UTC

whakim wrote: post #393

WalterBright wrote: post #387

Earlier quoted context omitted.

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…

Sure, some people will move their assets around in order to avoid wealth taxes (to which there are, of course, solutions). That being said, in France revenue from the wealth tax grew at more than twice the rate of GDP from 1990-2018. Which means that even though some people were avoiding the tax, and oversight was extremely lax, there's no evidence that it was being serially evaded. And this is in the context of the…

Note the part about the wealth taxes generated less revenue than the ordinary income taxes would have, since the rich left the country.

The fact is, those wealth taxes were repealed. Because they didn't work.

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

#397

Post by WalterBright » Thu, Oct 28, 2021, 4:45 AM UTC

PaulDavisThe1st wrote: post #390

WalterBright wrote: post #386

Earlier quoted context omitted.

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.

20% is still far from "a world without an estate tax".

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

#398

Post by rsj_hn » Thu, Oct 28, 2021, 4:45 AM UTC

PaulDavisThe1st wrote: post #395

rsj_hn wrote: post #391

Earlier quoted context omitted.

> Actually most billionaires manage to reshuffle their assets I was talking to some people sufficiently wealthy that this is a concern, and their point is that the only reason some don't transfer their assets like this is fear of their own children. Unless you really are a farmer, or small business owner, the estate tax is completely optional if you trust your kids. In 2019, there were only 2,570 estate taxes filed.…

If there are taxes, there's a tax avoidance industry. I mean, c'mon, there's a gigantic tax avoidance industry just for regular income tax. The proposed law under discussion here explicitly excludes privately held businesses and artwork.

> I mean, c'mon, there's a gigantic tax avoidance industry just for regular income tax.

Because we have an extremely complex tax code.

But seriously, eliminate all corporate taxes and replace that with a 10% VAT.

Treat all income the same -- I don't care whether it's a long term capital gain, or a meteor filled with gold crashing into your yard, don't distinguish at all. Put it all into a single bucket, get one number, look that up in a progressive rate table. Pay a percentage. No deductions of any kind for anything. Not for mortgage, not for kids, not for school, not for charity, not for solar panels, etc. But only tax income, not assets.

That would eliminate 99% of tax prep work.

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

#399

Post by adam_arthur » Thu, Oct 28, 2021, 4:52 AM UTC

seanmcdirmid wrote: post #373

adam_arthur wrote: post #370

Earlier quoted context omitted.

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.

> If you have 100m dollars, there's only a limited number of places you can put it. Stock market is a risky place to put it for sure, especially if the upside is taxed more aggressively. > What are you proposing re: direct income generation? They will invest more in private businesses and just take a salary, which is also taxed as income.

Most wealthy people are likely to own dividend paying stocks, so valuations don't matter as much for risk re the market.

They get paid every quarter by the company, and can just live off of passive distributions.

If they follow what you're proposing, they pay the higher tax rate anyway. But also don't think that's really feasible at very high net worth.

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

#400

Post by jurassic » Thu, Oct 28, 2021, 4:52 AM UTC

SirSourdough wrote: post #382

jurassic wrote: post #247

Earlier quoted context omitted.

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…

I didn't mean to suggest that millionares are a majority in the US. But they may well be a majority of those with the time, energy, money, and influence to meaningfully invest into political activities. A majority of those elected to Congress, including major wealth tax pushers Elizabeth Warren and Bernie Sanders, are millionares.

Broke people everywhere may harbor resentment toward the ultrarich, but it wouldn't be the national dialog we're having if millionaires in Congress and their millionaire friends in media didn't find it politically advantageous to turn billionaires into boogeymen.