Taxation of Carried Interest • Hacker News Board

Re: Taxation of Carried Interest

#211

Post by lisper » Sun, Jun 10, 2018, 5:43 PM UTC

greedo wrote: post #210

lisper wrote: post #196

Earlier quoted context omitted.

That's true, but you seem to imply that this is a bad thing. It's not. A municipality that does not borrow must either tax its current citizens to raise the money to pay for capital expenditures, or stop investing in infrastructure. Neither option produces vibrant economies, particularly in a country where people are relatively free to move.

It's not like munis are a gift; they are repaid through taxes on the citizens of the city/county/state. TANSTAAFL.

Right, but those citizens are paying less than they otherwise would if the lenders were taxes on the proceeds. That discount could be considered a "gift" from the federal government to both local governments and lenders, whose taxes are lower than they would be if muni income were taxed.

Re: Taxation of Carried Interest

#212

Post by fulafel » Sun, Jun 10, 2018, 5:44 PM UTC

drblast wrote: post #194

etaty wrote: post #124

Capital gain tax or income gain tax are designed to make the wealthy wealthier. Don't tax "gain", tax the "wealth". This will make it harder and harder to hoard wealth as you gain wealth. Every other "tax" can then be removed. So with the "wealth" taxt, every year you sum all your possessions and you give X% (20%?) to the government. This look simple enough to me, did any country try that?

Inflation is a wealth tax. It's not necessary for the government to ever tax anyone for anything; they could just print the money and all "taxes" would come in the form of inflation instead. And that tax would be simple and unavoidable. A very progressive tax system could be "print money and give it to everyone equally." If you're poor the guaranteed income would be a huge percentage of your wealth and since you have…

To be equivalent to a wealth tax, it would need to affect all assets, not just money.

Re: Taxation of Carried Interest

#213

Post by freeone3000 » Sun, Jun 10, 2018, 5:48 PM UTC

MR4D wrote: post #184

freeone3000 wrote: post #110

Earlier quoted context omitted.

That's nonsense. The gains of investing in a work crew still make money for capital. They still get their income. The increase in productivity is its own reward - the road gets built faster or with less labor, you're able to out-bid your competition. It makes more sense to extract money from the people who contributed money than from people who contributed labor.

Nonsense? #1 You’ve just discouraged capital investment. #2 you’ve just agreed with my initial statement that there is a reason carried interest is taxed the way it is. If you tax capital more than labor, then by definition, carried interest is fine, because the people who pay it ARE THE PEOPLE DOING THE LABOR!! Seriously, I realize that this is an emotional topic for many people, but you have to think through the se…

Carried interest is a misapplication of the idea of labor. Of course it's fine that they're taxed less than people who put up only money - but I disagree with the entire idea of capital taxation being less.

Capital investment is discouraged, but it's not as if it's going to stop due to this discouragement. What are people going to do with their money, NOT invest it? Found their own companies instead? Acquire capital assets and lease them? It's not as if you can work _instead_ of capital gains, cap gains income is passive.

Capital gains taxes in the US have been higher in the past, and at several points, were higher than wage taxes are now. Things worked out fine.

Re: Taxation of Carried Interest

#214

Post by beguiledfoil » Sun, Jun 10, 2018, 5:52 PM UTC

lisper wrote: post #203

beguiledfoil wrote: post #201

Earlier quoted context omitted.

Or rely on transfers from the federal government.. As most already do.. Munis are a timebomb, imho.

The entire economy of the world is a time bomb since it is predicated on exponential growth continuing indefinitely into the future. That cannot happen, so sooner or later we need to radically shift gears or we're in for a world of hurt. It's a question of when, not if. But since the current regime has been working for several millennia now, it is hard to make the case that The End is Near. It may or may not be.

>The entire economy of the world is a time bomb since it is predicated on exponential growth continuing indefinitely into the future.

Adding zeros is not that hard. Munis have actual tax bases and actual obligations and those seem out of step in some situations. That muni debt will be mispriced because of tax incentives seems obvious.

Municipalities are in the same spot that Greece or Italy is in. They have debt in a currency they do not issue. They cannot devalue or inflate that debt away. Therefore they have to manage their debt as a corporation or state would, but they are much smaller and less flexible. Bad buy.

Re: Taxation of Carried Interest

#215

Post by gghhzzgghhzz » Sun, Jun 10, 2018, 6:00 PM UTC

drblast wrote: post #194

etaty wrote: post #124

Capital gain tax or income gain tax are designed to make the wealthy wealthier. Don't tax "gain", tax the "wealth". This will make it harder and harder to hoard wealth as you gain wealth. Every other "tax" can then be removed. So with the "wealth" taxt, every year you sum all your possessions and you give X% (20%?) to the government. This look simple enough to me, did any country try that?

Inflation is a wealth tax. It's not necessary for the government to ever tax anyone for anything; they could just print the money and all "taxes" would come in the form of inflation instead. And that tax would be simple and unavoidable. A very progressive tax system could be "print money and give it to everyone equally." If you're poor the guaranteed income would be a huge percentage of your wealth and since you have…

not completely true that they could just print the money and demand no tax. Without demanding tax payable in the government's currency then nobody would have any reason to use that currency and the currency would have no value.

Re: Taxation of Carried Interest

#216

Post by ThrustVectoring » Sun, Jun 10, 2018, 6:02 PM UTC

bingoboingo33 wrote: post #197

beat wrote: post #54

The correct solution to this problem is to abolish the distinction between capital gains and ordinary income (ie wages), and abolish the corporate income tax that justifies the "double taxation" argument that justifies the capital gains rate. Capital gains is why Mitt Romney can make 200 times as much as I do in a year, and pay half my effective tax rate. This is broad across the economy. It's a fundamentally immoral…

The correct solution is to eliminate income-based taxes altogether, be they corporate, individual, derived from regular wages or derived from capital gains, etc ... and stick to a flat consumption based tax. But we're so deep down the rabbit-hole of our current system, we can't even imagine doing that. Without going to that level of simplicity, it's worth noting that some countries have done away with capital gains a…

If we're doing radical changes to the tax structure, land-value taxes have far better side-effects than consumption taxes.

Re: Taxation of Carried Interest

#217

Post by chimeracoder » Sun, Jun 10, 2018, 6:09 PM UTC

namibj wrote: post #134

stealthmodeclan wrote: post #119

Earlier quoted context omitted.

All that can be taxed as well. At the risk of increased compliance cost?

Just count every benefit one can feasibly calculate a dollar amount for the company provides the employee to the income for purposes of calculating income tax due. In German law there is a phrase for that, geldwerter Vorteil , formally Sachbezug . The wording is: > EStG §8 Abs. 2 Einnahmen, die nicht in Geld bestehen (Wohnung, Kost, Waren, Dienstleistungen und sonstige Sachbezüge), sind mit den um übliche Preisnachlä…

> Income, which does not

I believe you actually need to remove the comma there, so it becomes

> Income which does not

English and German have different rules for commas surrounding relative clauses. In English, including the comma changes the meaning of the sentence, and I'm pretty sure the meaning implied by the version of the sentence without this comma is the correct one (equivalent to the intended meaning in German). You'd also need to remove the comma at the end of the clause (before "are").

In any case: what you're describing seems to be analogous to what the US already does with regards to tax treatment of benefits.

Re: Taxation of Carried Interest

#218

Post by Retric » Sun, Jun 10, 2018, 6:10 PM UTC

savanaly wrote: post #208

beat wrote: post #54

The correct solution to this problem is to abolish the distinction between capital gains and ordinary income (ie wages), and abolish the corporate income tax that justifies the "double taxation" argument that justifies the capital gains rate. Capital gains is why Mitt Romney can make 200 times as much as I do in a year, and pay half my effective tax rate. This is broad across the economy. It's a fundamentally immoral…

I think what we're really upset about when it comes to rich people making a lot of money through investments is not that interest isn't taxed more, but rather that they had such a high (non-investment) income in the first place. In fact, I think there should be zero investment taxes. My reasoning goes like this: If I would rather have two coconuts seven years from now than one coconut today, and I'm willing to find s…

Alternatively, investments should have much higher tax rates. If someone invested money then they clearly did not need it, thus they need returns even less.

Really, you can try to justify any tax policy by reframing the question, but the root argument breaks down to having other people pay more so I pay less which is never really justified.

Re: Taxation of Carried Interest

#219

Post by colanderman » Sun, Jun 10, 2018, 6:16 PM UTC

savanaly wrote: post #208

beat wrote: post #54

The correct solution to this problem is to abolish the distinction between capital gains and ordinary income (ie wages), and abolish the corporate income tax that justifies the "double taxation" argument that justifies the capital gains rate. Capital gains is why Mitt Romney can make 200 times as much as I do in a year, and pay half my effective tax rate. This is broad across the economy. It's a fundamentally immoral…

I think what we're really upset about when it comes to rich people making a lot of money through investments is not that interest isn't taxed more, but rather that they had such a high (non-investment) income in the first place. In fact, I think there should be zero investment taxes. My reasoning goes like this: If I would rather have two coconuts seven years from now than one coconut today, and I'm willing to find s…

Your post belies one of the most harmful stereotypes that many rich and right-leaning people hold, that the poor would simply "rather have just one coconut today", and it's due only to their own short-sightedness and lack of impulse control that that they are poor.

For many people, it's not a fucking choice. It's eat your last coconut or starve until your next paycheck.

The recent story on HN about performance on the "marshmallow test" being predicated on being born rich is relevant: https://www.theatlantic.com/family/archive/2018/06/marshmall...

Your point about "penalizing future consumption in preference to current consumption" makes no sense either. Capital gains tax could be 99% and (modulo inflation) you'd still be ahead by investing, so I don't get your point. God forbid someone who earns their income from investing rather than manual labor should have to pay taxes on it.

Re: Taxation of Carried Interest

#220

Post by thinkcontext » Sun, Jun 10, 2018, 6:27 PM UTC

notahacker wrote: post #143

WalterBright wrote: post #139

Earlier quoted context omitted.

SpaceX shows that people with great wealth can embark on successful space programs. > charitable donations are generally tax deductible I find it ironic the complaint that wealthy don't use their money to help social causes and yet complain that such help is tax deductible.

SpaceX took enormous amounts of funding from the government, which also happens to be its only customer for most of its services. Virtually all the technological advances which made it feasible for Elon Musk to found a rocket company were based on enormously expensive state funded programmes which private companies would neither have had the fundraising ability nor the realistic expectation of returns to embark upon.…

SpaceX has saved the government boatloads of money by breaking the monopoly ULA had on government launches. It's one of the wiser investments the government has made recently as not only has it saved the government money but made a US company dominant in the commercial market to the point the market is expanding because costs are so low.