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

#461

Post by candiodari » Thu, Oct 28, 2021, 2:47 PM UTC

ncallaway wrote: post #455

fhrow4484 wrote: post #440

Earlier quoted context omitted.

> 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…

> As a way to protect himself from this dilution in ownership, what could he do? First, I think a “dilution in ownership” for founders is possible as an outcome of the tax structure. My quibble is mostly that the dilution will affect fewer companies that was presented, and will be less dilution than was presented. Specifically, I think it’d be a small enough amount that it’d flip the control from the individual found…

What is to prevent "franking" of capital gains the way dividends are franked (ie. every shareholder gets paid back whatever capital gains taxes they would need to pay to keep their stocks/control stable) ?

Obviously shareholders who are all equally affected by this would find this to be a fair deal. Likewise these companies exist because of the vision of the founders (or at least, that's a good argument to make. See Yahoo vs Google for example, or even Yahoo by itself)

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

#462

Post by dragonwriter » Thu, Oct 28, 2021, 3:17 PM UTC

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.

> But suppose it were publicly held,

But its not, for a reason, and there are existing reasons why companies don't tend to go public while still in the meteoric valuation growth phase.

And when companies are public, so that stock is a tradable asset subject to the tax, you can borrow against it; with sustained rapid appreciation, the interest rates will be substantially below the rate of appreciation, so there is no reason to liquidate assets to pay stock. Without sustained rapid appreciation, liquidating sufficient stock to pay the taxes won't force people to liquidate the bulk of their holdings, even over a long time.

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

#463

Post by lazide » Thu, Oct 28, 2021, 3:24 PM UTC

professoretc wrote: post #460

lazide wrote: post #422

Earlier quoted context omitted.

Only if you don't file any permits, correct? I'm not aware of anywhere that won't reassess on major improvements. Which is partly why SF Bay area housing is so terrible - none of the owners want to trigger a reassessment, as in many cases it may increase their tax bill 10x.

I just got the form from the county for this for some improvements to my house, so I can answer. Permits for "improvements" are sent on to the county tax assessor, and they send you a form basically asking for the value of the improvement. Note that "maintenance" doesn't count, only "improvements" (and then only specific improvements; e.g., adding solar doesn't count). The value gets added to your Prop 13 value, but…

The property I’m currently renting has an assessed value of $248k. A nearby comparable house just sold for $2m. It’s not unusual around here for that to be the case.

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

#464

Post by gonehome » Thu, Oct 28, 2021, 3:28 PM UTC

wolverine876 wrote: post #403

gonehome wrote: post #352

Earlier quoted context omitted.

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…

> that's not really true of Elizabeth Warren, Bernie Sanders, or a lot of representatives in congress We can cite a few examples, but the great majority of elected Democrats, including the most powerful one (Biden) are centrists. > 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 pol…

I’d like to think I mean “non-partisan”.

One thing that keeps me honest there is that I hold positions across the political spectrum (not all in the center) - usually this makes partisans uncomfortable because they don’t know which “camp” I’m in.

I think dismissing the anti-woke stuff in the way you do isn’t an accurate portrayal, sure partisanship is definitely motivating some but not all (not me) - it’s because I think it’s genuinely bad policy.

I’m not making a false equivalence either - the trump stuff is awful and a lot worse. Which is why I wish there was a sane center-right party.

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

#465

Post by dragonwriter » Thu, Oct 28, 2021, 3:30 PM UTC

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…

> As a way to protect himself from this dilution in ownership, what could he do?

Borrow against his stock holdings to pay the taxes, at interest rates far below the rate of stock appreciation. (That people already do this—but not for taxes—to perpetually avoid realizing gains while enjoying all the benefits of the gains is central to the explicit motivation of this bill, so its kind of a major oversight to ignore it as an option for paying the taxes.)

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

#466

Post by ncallaway » Thu, Oct 28, 2021, 3:31 PM UTC

candiodari wrote: post #461

ncallaway wrote: post #455

Earlier quoted context omitted.

> As a way to protect himself from this dilution in ownership, what could he do? First, I think a “dilution in ownership” for founders is possible as an outcome of the tax structure. My quibble is mostly that the dilution will affect fewer companies that was presented, and will be less dilution than was presented. Specifically, I think it’d be a small enough amount that it’d flip the control from the individual found…

What is to prevent "franking" of capital gains the way dividends are franked (ie. every shareholder gets paid back whatever capital gains taxes they would need to pay to keep their stocks/control stable) ? Obviously shareholders who are all equally affected by this would find this to be a fair deal. Likewise these companies exist because of the vision of the founders (or at least, that's a good argument to make. See…

I don't think anything would prevent it, but I doubt many companies would have equally affected shareholders.

The point that I agree with Tim the most is that this legislation only affects individuals, not corporate owners. I'd absolutely want to apply it to those owners as well. But, an investment group would not be taxed the same way as individual owners, and so might be less inclined to approve such payments.

Also, since each individual can exempt up to $1B in assets, it would only be those individuals that hold a massive amount of the company that would typically be liable for the tax burden. So, an early employee that has $900M of Facebook shares wouldn't receive any of the tax-payback money that Zuckerberg would receive. Because the exposure would be fairly selective, it seems marginally less likely that enough shareholders would be equally affected at a company to find it to be a fair deal.

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

#467

Post by satronaut » Thu, Oct 28, 2021, 4:33 PM UTC

_carbyau_ wrote: post #407

satronaut wrote: post #240

Earlier quoted context omitted.

what does the government need all that money for anyways?

Same could be asked of any billionaire. Think about it. 1 Billion. A person who lived 100 years would have $27,397 a day to spend. Including as a newborn infant. At Bezos levels? roughly $5.3 million a day. What could you do with 5 million a day? Well for the first 3 months of your life as a newborn, not much probably. But as an adult certainly, you could find ways to spend it right? Great. Society would love to see…

with that logic, what's the threshold for forcing them to spend down their wealth? 1 billion, half a billion, 1 million, 1 hundred thousand?

If the government takes it, what are they going to spend it on? Foreign wars, jails, lavish mansions for leaders?

But quite honestly, if somebody makes a successful business, wise investments, or works their ass off building an empire, who's to say they can't enjoy all the wealth they've brought in?

Bezos may be filthy rich, but because of the countless hours of work he put in (don't tell me he didn't work nights and weekends while his employees worked 9-5) so you can enjoy groceries on demand, 2 day delivery on almost anything you want, and great video streaming. Stop using the services he created if you want his wealth to go down.

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

#468

Post by aluminum96 » Thu, Oct 28, 2021, 5:14 PM UTC

hn_throwaway_99 wrote: post #311

sailingparrot wrote: post #196

Earlier quoted context omitted.

The issue is that many billionaires effectively have zero revenue. For example, Elon's salary at Tesla is 0$ per year. So you can increase the top bracket all you want, they won't pay more. Instead they get liquidity through loans backed by their shares, on which they of course have no tax. I agree that taxing based on unrealised gains is not a good solution, but I don't see how raising the top bracket solves that ei…

People keep using this example, but it doesn't really make sense. If you take out a loan against the value of your increased shares, then you still have to pay that loan back eventually, and when you do, you have to pay tax on whatever you liquidate to get the funds to pay back the loan (in addition to paying interest on the loans). This is literally how all loans work. The one loophole here is that if you don't pay…

Even if heirs do have to pay tax eventually, do we really want to wait 40+ years to collect taxes on wealth that is being generated using today's resources? If I recall correctly, Elon has been rolling over his personal loans for a while now, in excess of a billion dollars. At this point, these are basically untaxed stock sales.

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

#469

Post by downrightmike » Thu, Oct 28, 2021, 5:18 PM UTC

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.

Its not like companies that are listing to the stock markets have any value left. Most of them are just using it after they've burned all their rounds of funding to hopefully dump the picked over carcass on retail and pension funds. So the less they CAN dump, the better.

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

#470

Post by wolverine876 » Thu, Oct 28, 2021, 5:33 PM UTC

gonehome wrote: post #464

wolverine876 wrote: post #403

Earlier quoted context omitted.

> that's not really true of Elizabeth Warren, Bernie Sanders, or a lot of representatives in congress We can cite a few examples, but the great majority of elected Democrats, including the most powerful one (Biden) are centrists. > 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 pol…

I’d like to think I mean “non-partisan”. One thing that keeps me honest there is that I hold positions across the political spectrum (not all in the center) - usually this makes partisans uncomfortable because they don’t know which “camp” I’m in. I think dismissing the anti-woke stuff in the way you do isn’t an accurate portrayal, sure partisanship is definitely motivating some but not all (not me) - it’s because I t…

> I think dismissing the anti-woke stuff in the way you do isn’t an accurate portrayal, sure partisanship is definitely motivating some but not all (not me) - it’s because I think it’s genuinely bad policy.

I think either favoring 'woke' or being 'anti-woke' is partisanship. It's applying a label and dismissing it. The non-partisan thing is to look at each policy, regardless of labels applied by others. Even using the term is arguably (and arguably unintentionally) partisan - it adds nothing to the analysis and even works against it: It encourages inflames partisanship, which is a cancer.