I’m okay with taxes on unrealized gains if I can get money from unrealized losses (and not just tax credits).
Taxing unrealized gains has caused an entrepreneurial exodus in Norway
131–140 of 150 posts
Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway
#132Earlier quoted context omitted.
What a nice way to preserve feudal classes. It'd be just terrible if someone not rich attempted startups.
I don’t support these kinds of taxes but I think that is also a little hyperbolic. Poll taxes, and even flat taxes can also be seen as unjust taxes on ‘money you do not have’ when you subtract the cost of life from someone’s income. This one is novel in the modern era because it only substantially negatively affects capital owners, rather than wage / fixed income earners. As both capital owner and wage worker though,…
No, it substantially negatively affects people who don't have any capital. People who do can deal with it.
Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway
#133Earlier quoted context omitted.
Yes, well credit and other mechanisms keep the ledger balanced. Do you think you're the first person who thought of that criticism or that none of the economics professionals though to address it? What arrogance.
Yikes. I'm interested to see how it handles that. The risk aspect is one reason capital gains are taxed at a lower rate than regular income. I guess it's not a tax on gains per se but specifically a wealth tax.
I'm okay with a wealth tax if it stops the runaway growth of wealth inequality.
Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway
#134easy, impose an exit tax. capital doesn't need to be free when it's trying to evade justice. you pay tax on unrealised gains the same way the rest of us do when facing an unexpected bill that we can't afford - you sell your stuff.
Law != justice. Else, you won't have the concept of unjust laws.
any law I agree with is justice though, almost by definition.
Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway
#135Earlier quoted context omitted.
Let's say you have a tax debt of 1m, and your choice is to take out a 1m net dividend. Now you have to pay dividend tax. The other alternative is to borrow 1m, and pay interest on a 1m loan. Unless you hold the loan long enough for the aggregate interest accrued until you're able to sell some shares exceeds the dividend tax, it's a net saving.
Ah, ok. But how many illiquid companies pay out dividends though? The real alternative is to not tax illiquid wealth.
> Ah, ok. But how many illiquid companies pay out dividends though?
Ones whose founders have protected themselves against a significant wealth tax bill by ensuring investment agreements etc. protect their ability to. It's not rocket science to make this work if you worry about it.
> The real alternative is to not tax illiquid wealth.
Why? Taxing illiquid wealth has worked just fine in Norway for decades.
Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway
#136Earlier quoted context omitted.
Over half of the value of exports is oil and mining, but oil production, mining and quarrying directly employ only about 23,000 people, compared to 190,000 in manufacturing for example. Because such a large portion of the oil proceeds are banked, it also distorts the rest of the economy far less than it otherwise would. Unless you live in very specific parts of Norway, you can go your entire life with hardly any expo…
Warning: not an economist :) I recognize your point but am wary of it being supported with direct job creation numbers, as that doesn’t reflect the scale of secondary industries (ie. indirect jobs created by oil & mining may be a larger number than direct jobs created) and also, job numbers don’t reflect the scale of the companies creating the jobs.
There's now doubt it'd have secondary effects, which is why I didn't try to make a precise comparison. Shutting down the oil industry would certainly make a difference. Hence the focus on shuffling so much of it into the oil fund (the Norwegian sovereign wealth fund owns ~1.5% of all listed shares globally at this point) to compensate, but there's no realistic scenario where it'd account for a large proportion of jobs.
In terms of value, yes, it'd have a much greater impact, which is why they're being taxed at rates that even for Norway are absolutely extreme, and why the oil fund does not invest inside Norway, and why such a small proportion of the oil funds investment returns are spent each year - it's been a very intentional government policy for decades to both prepare for a future without the oil income and to reduce the effect it has.
Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway
#137Earlier quoted context omitted.
The fairest system would be a flat tax per person, surely. Each person will use a pretty average amount of state resources. It's expensive to live in California, after all.
I can remember when people actually advocated for a flat tax with a straight face. Freaking hilarious idea supported by shallow thinkers.
It wouldn't surprise me, though I've usually seen that applied as a reductio ad absurdum to show that the notion of a flat percentage as "fair" is arbitrary because surely a flat tax would be even fairer - on the basis that it highlights how flattening out the tax curve can make the burden on the poorest unsustainable.
Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway
#138Earlier quoted context omitted.
> Norway imposes a wealth tax that taxes unrealized gains at approximately 1% annually. Calculated on the full market value for publicly traded assets and the book value of private companies. On New Year's Eve, whatever your net worth - including illiquid assets - is subject to this tax. It doesn't matter if you're running a loss-making startup with no cash flow, if your investments have tanked after the valuation da…
Do they give a tax refund if the assets then lose (notional) value the next year?
in many places you can claim the last few years worth of losses as offset on your profits before taxes.
Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway
#139Earlier quoted context omitted.
Anybody earning a wage pays tax on revenue, not profit. Property taxes can be even be on value, not revenue or profit. For any given tax burden, I don't see the "justice" problem by shifting more of that towards value and revenue and less towards profit. You could argue that in a vacuum that it is more just because it slightly incentivized investment over saving. And I'm sure you could argue the reverse too. However,…
> Anybody earning a wage pays tax on revenue, not profit Not really though. You do have deductions in the US (though limited). https://www.irs.gov/credits-and-deductions-for-individuals And lots of places don't tax houses or real estate.
Those deduction in no way change the basics of income (and sales) tax, which is on revenue, not profit. A person that has a good wage will pay a significant amount in tax even if at the end of a year they have no more wealth than before it; i.e. no profit. And while of course there _exist_ places that don't work this way or don't tax real estate that doesn't diminish the fact that there exist places that _do_ work this way - which demonstrates the fact that there's no broad agreement that taxation must be limited to and occur after profits. Norwegian self-proclaimed entrepreneurs aren't unique in their "victimhood", which seems to be the angle of the original article.
Consider a though experiment: In a fast-growing world, taxation limited to profits when honestly applied and without exploitable loopholes (not an obviously satisfied precondition) might be able to cover costs of shared concerns, i.e. government's primary business. But imagine for a moment that that growth were to significantly slow or even stop - without profits, taxation could fall to a trickle (limited to those niches that have zero-sum profits yet lack the ability to amortize over loss making periods and lack the ability to strike a deal to fiscally merge with a loss-making business for tax purposes). Clearly, that's not sustainable. I think it's hard to imagine that the the only "just" way to tax is one that is fundamentally dependent on permanent significant growth, even if we've been lucky enough to live in such a world for quite a while, at least on paper. Given how some costs (e.g. depletion of natural resources and pollution) aren't on the fiscal books, and that from an idealistic free market stance one might prefer to include those costs on the books, the true global growth is surely already lower than it looks on paper, even if it's still hopefully positive.
Re: Taxing unrealized gains has caused an entrepreneurial exodus in Norway
#140Earlier quoted context omitted.
And how would they pay back a loan?
If their business grows at a rate higher than interest, there's no reason why the bank wouldn't be happy to add the interest to the loan. If their business is growing at a rate lower than interest, it's a poor investment and they ought to sell it off and put their money somewhere else. Such as lending it out.
This is just delaying the payment. OK, let's assume they do it for 1,2,3 years and that the bank is happy not to receive any payment in those 3 years. Now they've accrued interest-on-interest and the more time passes the more they'd have to pay back. So my question remains - one day they'd have to pay it back and on that day they'd have to sell assets and pay 36% tax.