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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

#441

Post by WalterBright »

PaulDavisThe1st wrote: post #427
WalterBright wrote: post #423

Earlier quoted context omitted.

The cited article has zero information on what percentage of Washingtonians die with more than $2,000,000 estate value. Drawing a conclusion that it is "almost nobody" is completely unwarranted.

It seems very difficult to find such information. The best I've managed to do so far has been a report from 2006 which stated: > About 200 estates per year in Washington pay taxes out of 45,000 deaths – less than half of 1%. http://www.opportunityinstitute.org/wp-content/uploads/tax-r... It seems likely that this number has increased since 2006. But by how much? The same report noted total estate tax revenue at $100M…

Thanks for doing the work to get better information.

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

#442

Post by YeBanKo »

herval wrote: post #112
coenhyde wrote: post #72

Bad idea to tax unrealized capital gains. Proposal; How about we gut our entire tax code and replace it with a single tax that taxes when money moves from one entity to another. Let's call it a Transaction Tax. It would replace Sales Tax, Income Tax, Capital Gains Tax, Inheritance Tax, etc and introduce tax on debt creation (when the bank gives you the money). This would close all loop holes and put the entire tax in…

Brazil had such a tax for a long time. It was sub-1%, and was largely agreed as a bad model, since it led to lower liquidity, drying of credit markets, lower consumption, cash hoarding, etc. So not necessarily a great idea. https://www.researchgate.net/publication/249882612_The_Econo...

US taxes unrealized capital gains as well: NSO and AMT on ISO.

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

#443

Post by bskrobisz »

WalterBright wrote: post #389
bskrobisz wrote: post #290

Earlier quoted context omitted.

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.

I'm... confused as to what your interpretation of my comments here is. I'm explicitly stating that the issue isn't about people deciding they owe something to other people, or what the market decides the value of something is--it is about people in highly-leveraged positions who are currently able to waste resources or actively cause damage with some impunity because of the value their leverage allows them to provide.

I'm not making the suggestion that those who are wealthy should divest themselves of their wealth and donate it to charity, the point I'm intending to communicate is that such leverage shouldn't act as a pass to engage in unethical behavior.

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

#444

Post by Brian_K_White »

fhrow4484 wrote: post #440
ncallaway wrote: post #384

Earlier quoted context omitted.

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…

> 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. I guess one can do the mental exercise of consider what would have happened had this law been in place already to Bill, Jeff, Sergei, Larry, and Mark. Ignoring whether it's a "g…

"Not go public" seems most sensible to me, from both sides, being a Zuck/Bezos/Gates/etc, and being the rest of the economy and society with Z/B/G/etc's in it.

If your priority is continuing to own your creation, then by all means, keep it.

If the setup disincentivises the creation of Z/B/G/etc's, I don't consider that a detriment to the overall society.

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

#445

Post by pas »

seanmcdirmid wrote: post #366
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…

> - 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)?

If you move money from one stock market position to an other do you realize your gains? If not, then said investors can simply dump their gains into small new companies that are on the stock market. (Plus see SPACs.)

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

#446

Post by refurb »

adam_arthur wrote: post #433
refurb wrote: post #408

Earlier quoted context omitted.

You need to start putting realistic numbers. First off, if you double the tax rate on capital gains you'll see a dramatic change in behavior. You're not going to capture 75% of the expected, maybe half that. Instead of companies issuing equity, they'll just issue debt instead if it has clear tax advantages for investors. Stock buy backs will end, they'll just pay it out as dividends instead. So $0. SALT deduction has…

I explicitly stated in my response that behavior would change in response to tax policy changes. Why state that as if I didn't lead with that? There's 0 chance that capital gains will drop from 1T to much less than 500B, or that buybacks go to 0. You think people will suddenly never sell their assets because the tax rate is higher? Dividends are already taxed at 20% for most people, yet companies still pay dividends.…

Money will shift from capital gains to other investments. Same with buybacks. I mean, that's why company's do buybacks today, they are tax advantaged.

And I don't get why you'd tax stock buyback. That's a key way company's control their equity. Take $10B to buy $10B of their own stock and you'd make them pay $2B in taxes? Really?

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

#447

Post by pjc50 »

robbedpeter wrote: post #363
PaulDavisThe1st wrote: post #347

Earlier quoted context omitted.

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…

House price inflation happens not because people "invest" in homes but because of the market. It is to a great extent driven by low interest rates.

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

#449

Post by Jyaif »

the_optimist wrote: post #332
missedthecue wrote: post #250

Earlier quoted context omitted.

Saving is when you put your money in the bank, who then loan it out to businesses and homebuyers. Putting cash under your mattress just takes it out of circulation.

This conveys a misunderstanding of money creation. The bank specifically does not need your cash to make loans; that is in fact what makes it a bank. However, putting your cash inside your mattress withholds your funds from the investment manager, who would or could invest it in risk assets.

> The bank specifically does not need your cash to make loans

They do: the more money a bank has, the more they can loan.

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

#450

Post by mikem170 »

WalterBright wrote: post #165
mikem170 wrote: post #146

Earlier quoted context omitted.

I don't follow your reasoning, either. Do you really think that a new tax on several hundred billionaires will discourage the hundreds of thousands of entrepreneurs that are out there, that a significant amount of them will not bother since they can only make a few hundred million before they have an extra 15% of their money collected in taxes? Most entrepreneurs would be overjoyed to be a billionaire and have to pay…

Extracting the money from them will mean less investment. It's simple mathematics. You take away a billion from an investor, then a billion is not invested. Even worse, you're taking the money away from the most effective investors.

Maybe that's the part I'm confused about. Aren't they talking about taxing unrealized capital gains, i.e. money that is being left locked up in a single stock, in order to avoid being taxed when it is moved? Wouldn't one of the effects of this tax be to incentive these effective/successful billionaires into moving their money into new investments, instead of being left parked in their already successful investment?

And most entrepreneurs are not, nor will never be, billionaires who are subject to this extra tax. That being the case I wouldn't think that this will put a dent in overall entrepreneurship. It might have the opposite effect, where there are numerically more entrepreneurs making capital allocation decisions, which might be better for society than having fewer people (billionaires) controlling an ever increasing amount of capital.

I grant that tax changes like this have numerous conflicting effects, sometimes unpredictable. Perhaps their will be another art bubble...

I don't think that it's a good thing that we structure our society for the convenience of those who can amass money. I'm definitely not fond of kludgy taxes like this one, but I also don't understand why so many jump to the defense of so few billionaires.

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