Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

We are publishing the tax secrets of the .001%

propublica.org

Post reply on HN
Print view View original

221–230 of 580 posts

Re: We are publishing the tax secrets of the .001%

#221

Post by flabbergasted »

edmundsauto wrote: post #217
HPsquared wrote: post #212

Earlier quoted context omitted.

When a person moves house, the proceeds from the sale of the old house are used to buy the new house. If someone has lived in an area for a long time, wants to move across the street to an otherwise identical house with the same value, why should they be taxed for that move but not for simply living in the first house?

This is exactly what happens. If you buy house #2 within 90 days, you can do a 1031 (I think?) property exchange. Then you don’t pay taxes on the first sale.

This tax deferment only applies to investment property. As I understand it, if you're living there, then 1031 is not an option for you.

Re: We are publishing the tax secrets of the .001%

#222

Post by jvanderbot »

scott_w wrote: post #177
jvanderbot wrote: post #114

Earlier quoted context omitted.

No, it was a question, not an argument. Let me restate it: Buying a stock (or bitcoin) uses gobs of the same regulated, government-funded infrastructure. If that stock/coin becomes immensely valuable, that (the fact that I now have a high net worth) makes me "wealthy". What I'm asking is: Please clarify whether the intent is to tax people based on their net worth (wealth), not their income. The articles are not clear…

Look at the countless issues raised by people being unable to exercise stock options for tax reasons. It’s clear that taxing stock is NOT unprecedented. We’ve seen repeatedly over the past 50 years that Bezos will NOT be taxed of that wealth under the current system. There’s nothing sacred about different types of wealth. The question is whether society can benefit more from taxing and redistributing that wealth, or…

> Look at the countless issues raised by people being unable to exercise stock options for tax reasons. It’s clear that taxing stock is NOT unprecedented.

It is unprecedented to tax someone on the value of their unsold stock. That's what a wealth tax would be: We force someone to pay taxes on something (their holdings / net worth) simply because it is valuable, but not necessarily because it was liquidated into cash (sold). (like we do with land, but not stocks).

> There’s nothing sacred about different types of wealth. The question is whether society can benefit more from taxing and redistributing that wealth, or whether Bezos can by hoarding it.

I think the answer to my question is: Yes, taxing wealth is one way of extracting more public funds from those who are the most wealthy, and many such ways should be considered.

I don't advocate for/against this, I just want to understand and find appropriate analogies.

Propublica seems to have taken advocacy a priori, when comparing wealth to income, and that was confusing to me because it is actually a drastic change without precedent that I'm aware of (except perhaps land ownership).

Re: We are publishing the tax secrets of the .001%

#223

Post by ejstronge »

edmundsauto wrote: post #217
HPsquared wrote: post #212

Earlier quoted context omitted.

When a person moves house, the proceeds from the sale of the old house are used to buy the new house. If someone has lived in an area for a long time, wants to move across the street to an otherwise identical house with the same value, why should they be taxed for that move but not for simply living in the first house?

This is exactly what happens. If you buy house #2 within 90 days, you can do a 1031 (I think?) property exchange. Then you don’t pay taxes on the first sale.

This is generally only true for investors, not for people who buy real estate for the sole purpose of obtaining lodging

Re: We are publishing the tax secrets of the .001%

#224

Post by iso1631 »

twinge wrote: post #145
ajb wrote: post #113

Earlier quoted context omitted.

"What's stopping the average citizen from exploiting this tax avoidance strategy?" Probably that the average citizen doesn't have capital gains.

Only 55% of Americans own stock: https://news.gallup.com/poll/266807/percentage-americans-own...

most of those will be in retirement plans which I assume aren't taxed?

Re: We are publishing the tax secrets of the .001%

#225

Post by lumost »

1024core wrote: post #216

I'm not sure I agree with taxing the "wealth", instead of income. Sure, on paper, Buffett's wealth went up by $23B; but these are just imaginary numbers based on the whims of the market. The tax should be on what amount of money actually flowed into his bank account.

The problem is that there is no way to track what flows into his bank account. Evidence says that he can avoid being taxed on any dollars flowing to his bank account.

This wasn't a huge problem a century ago due to the Estate tax ensuring that estates would shrink over time and eventually be taxed. In stark contrast to European laws that required estates to be maintained in their entirety to preserve the aristocracy. If Buffett can avoid tax during life and death and pass on a preserved estate then there is no guardrail against a gentle class. Fundamentally it also means that we've setup a tax system more akin to a feudal system where workers pay taxes and aristocrats receive benefits.

Re: We are publishing the tax secrets of the .001%

#226

Post by omgwtfbbq »

nostrademons wrote: post #187
ipython wrote: post #164

Earlier quoted context omitted.

I agree with your general point, but your specific example of selling highly appreciated real estate is a poor one, since you incur no tax when selling your primary residence (up to something like $500k gain - over your cost basis which includes any capital improvement you made to the property) as long as you lived there for two of the last five years. It’s a huge tax advantage for homeowners. One could argue that it…

> (up to something like $500k gain - over your cost basis which includes any capital improvement you made to the property) In a lot of markets this absolutely hits the "moderately wealthy trying to leave the working class". Bay Area houses that went for $1.2M in 2009 now go for about $3M, for a gain of $1.8M. That's well over the $500K exclusion, even including capital improvements. Few folks will shed a tear for peo…

>Few folks will shed a tear for people who own a $3M house simply by virtue of living in a hot area, but that's exactly who the OP is talking about.

You lose a lot of money to taxes when you win the lottery, should we modify the tax code for those people too?

Re: We are publishing the tax secrets of the .001%

#227

Post by dantheman »

MR4D wrote: post #205
Wowfunhappy wrote: post #175

Earlier quoted context omitted.

But the Bay Area's high prices are driven by scarcity + demand, not intrinsic cost. So if everyone had a higher tax burden, I'd expect costs to come down.

Unless a huge earthquake hits it, the Bay area will always be worth more than central Kansas. At a minimum, there is one simple reason for this - the amount of infrastructure investment over the years (power, sewer, roads, etc), of which there is basically none in central Kansas, but loads of in the bay area.

It has nothing do with physical infrastructure and everything to do with social infrastructure - the people and organizations that are located there.

And the weather.

Re: We are publishing the tax secrets of the .001%

#228

Post by speapr »

bjornsing wrote: post #190

Interesting, but Pro Publica’s calculation of effective tax rate as taxes payed divided by wealth increase is weird. I don’t think there’s a jurisdiction in the world that calculates tax that way, and there are good reasons for that.

The exact point is that because taxation does not consider this income, the vast majority of the money made by very rich people takes this form. Pro Publica's point is not that these people are breaking the law, but that the tax system should be different.

Re: We are publishing the tax secrets of the .001%

#229

Post by ta1234567890 »

realce wrote: post #159
Wowfunhappy wrote: post #134

Earlier quoted context omitted.

> Every time someone tries to make a tax targeting the ultra rich, it ends up hurting the moderately wealthy instead. Every. Single. Time. Could you please share some of the situations you're thinking about here? I'm not familiar.

If you have just enough assets to be "rich" but don't have enough to purchase tax assistance, you've become unprotected prey. Everyone that can afford this tax assistance has a lower cost of business than you, everyone poorer has a lower tax burden.

Very interesting concept. This happens with lawsuits. If you have enough money/assets to be an attractive target for a lawsuit, but you don’t have enough to pay to defend the lawsuit, you are also “unprotected prey”.

An example: in SF/LA (California), a decent civil litigator will cost about $400+/hr. And a lawsuit will run for 1-3 years. When you add all the legal costs up, it turns out that just to defend yourself, you’ll need to spend about $100-$200k. So, unless you have quite a bit of money, you’ll have to either default or settle in maybe not very favorable terms. Either way, you might end up bankrupt, in debt for a long time, or just with no savings at all.

Re: We are publishing the tax secrets of the .001%

#230

Post by MR4D »

fairity wrote: post #142
jedberg wrote: post #123

Earlier quoted context omitted.

My Etrade account has that option. But I don't use it because it's risky. If you take out a loan collateralized by a stock, the stock could drop and you'd owe a lot of money. Selling the stock locks in the gain. Now, if you only need say 1/2 the value as cash and can absorb the risk of the stock going down, then it makes sense. Or if you want to "buy insurance" by taking out an opposite short position, that would als…

Why isn't there an option to take out a loan where a repayment option is to transfer the capital asset (at whatever the value happens to be at the time of repayment)? I.e. I don't get why the risky part of this loan can't be mitigated by the bank taking on the risk and managing it separately. Surely, there would be investors willing to back these types of collateralized loans?

> ... bank taking on the risk...

Banks don't take on risk. Seriously.

That's another conversation to have, but the simple answer is do you want the value of your checking account impacted by someone else's purchase of Gamestop, or Enron?

And that's why banks don't take risk.

Post reply on HN