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Exit Tax: Leave Germany before your business gets big

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Re: Exit Tax: Leave Germany before your business gets big

#291

Post by robocat »

trinix912 wrote: post #243
jeofken wrote: post #194

Earlier quoted context omitted.

Norway has a high wealth tax (it’s gonna be 1.1% of total wealth per year in normal cases), high capital gains tax, and an exit tax treating moving abroad as a capital gains event. This means, if you start a not-yet-publicly-listed company, get investment at a high valuation (on paper), you must pay wealth tax as if you had that money liquid in your own name. But you don’t have it liquid, it’s yet just a valuation of…

> This means any Norwegian trying to start eg a fast growing software biz must relocate to Sweden if they want to be close to home, or Switzerland more realistically, as swedens top income tax bracket is >50%. There's nothing stopping them from doing that in Norway, they just have to pay their dues. Which are nowhere near the rate of those in a real communist system that people are so quick to label it as. I find it…

> I find it very selfish to think that we should optimize everything to squeeze out the remaining 1.1% of the wealth, given that Scandinavia wouldn't have such a high living standard had it not been for the welfare system.

1.1% is deceiving. 1.1% is actually over 20% tax on savings (assuming a common drawdown of wealth at 4% per year). Plus savings are usually money that has already been taxed. If you can invest at a higher return then the numbers improve but the risk increases (and governments don't share the risk or otherwise ameliorate it) and the taxes remain if you win.

1.1% sounds small. Any analytical person analysing the rewards versus the risks of founding a company will decide that it isn't worth it. Even if you win, you lose.

Here in New Zealand no founder can plan for a decade timeframe because there's a high chance a new government will screw you if you make any winnings. Currently our taxation system encourages entrepreneurship a little (no CGT).

A taxation system needs to be designed to incentivise individuals to create businesses. The government wins through income taxes and sales taxes - it doesn't need to kill the golden goose by overtaxation.

Most people have a selection bias: they see the winners and think those "greedy bastards" should pay more. Few people weigh up the invisible costs of the people that tried and failed. Very few people consider the benefits accrued to society from businesses (consumer surplus, tax income through other taxes, etcetera).

Re: Exit Tax: Leave Germany before your business gets big

#292

Post by agent327 »

lazide wrote: post #166
Shorel wrote: post #160

Earlier quoted context omitted.

That's not that bad an idea, with some caveats. An incentive for entrepreneurs? It can help kickstart a stagnant economy.

Why not just be a hairdresser? Way less stress. The economy is stagnant for a reason. At some point, the juice isn’t worth the squeeze.

Who would employ you, if nobody was motivated to start the salon?

Re: Exit Tax: Leave Germany before your business gets big

#293

Post by agent327 »

Shorel wrote: post #160
lazide wrote: post #151

Earlier quoted context omitted.

Huh? Why take all that risk, for no additional reward? If the business fails, is the gov’t going to keep paying them like a hairdresser or whatever?

That's not that bad an idea, with some caveats. An incentive for entrepreneurs? It can help kickstart a stagnant economy.

Yeah, that exists. It's called "not having oppressive tax rules".

Re: Exit Tax: Leave Germany before your business gets big

#294

Post by exe34 »

Or you could pay your fair share to contribute back to the country that supported you initially by providing education, labour, infrastructure, etc.

The moment we talk about piracy it's all about how poor billionaires will have to sleep in their cars if you make a digital copy of something you would not have otherwise bought, but when it comes to supporting the society that created you and your wealth, suddenly it's all about finding ways to weasel out of paying.

Re: Exit Tax: Leave Germany before your business gets big

#295

Post by roshin »

fyrn_ wrote: post #186
DrBazza wrote: post #176

Earlier quoted context omitted.

> You're probably instead thinking of income tax, which the US does levy worldwide contrary to virtually every other nation on Earth and is, I can tell you from personal experience, not fun. That's certainly what I was thinking of, given I have a few US friends here in the UK. Isn't the way to stop that to simply give up dual citizenship?

You won't be double taxed, the US taxes the difference between your local income tax rate and the US federal tax rate. So if you live in London you're not paying any US tax because the UK income tax rate is higher. It helps stop rich people from "totally live in ". If only we had that for companies.. I think where people get confused is that it's implemented as a tax credit which is equal to the income tax you pay lo…

Another issue is if another country has some tax free benefits (like Roth IRA) America taxes the extra.

Re: Exit Tax: Leave Germany before your business gets big

#296

Post by jmyeet »

tomcam wrote: post #141
jmyeet wrote: post #92

The developed world is increasingly facing a funding crisis brought on by this propaganda that if we tax corporations and the very wealthy then they'll leave. One of the most farcical examples of this is the decades-long race to the bottom on business taxes and incentives between Kansas City, Missouri and Kansas City, Kansas. For the non-Americans out there, this is basically one city but it sits at the border of two…

Clear explanation, thanks. Seems that many companies have moved from California to Texas or Tennessee. Am I wrong?

You're not wrong. The reasons why come down to really one or more of these factors:

1. To lower labor costs. For example, the Big 3 auto makers are unionized. Tesla's manufacturing isn't. Guess who earns more? [1];

2. Deregulation. Some things (eg polluting) are way easier to get away with in Texas than, say, California;

3. To shift the tax burden from the owners to the workers. Texas famously has no state income tax. It does have sky high property taxes though. Property taxes are a super regressive tax;

4. For the politics of the owners; and

5. Other miscellaneous reasons. For example, Texas is about the absolute worst place to get divorced for a spouse who is a parent and isn't the primary income earner. Why? Texas courts won't let you move out of state with the children [2] and child support will be severely capped [3], even if, say, the other parent is a billionaire.

[1]: https://www.businessinsider.com/tesla-pay-vs-ford-gm-uaw-uni...

[2]: https://www.thetxattorneys.com/child-custody/relocation

[3]: https://ondafamilylaw.com/what-is-the-maximum-child-support-...

Re: Exit Tax: Leave Germany before your business gets big

#297

Post by carlosjobim »

Wobbles42 wrote: post #289
mytailorisrich wrote: post #208

Earlier quoted context omitted.

Capital gain is the profit made on the sale of a capital asset. There is no gain or loss until the asset is sold. Taxation is not deferred, it applies when the gain is made, i.e. upon sale.

This needs to be repeated more often. If I buy a house for $100k, and next year some idiot pays $1M for a very similar house three streets down, did I just magically make $900k? Should I be taxed on that gain immediately? Should I be forced to sell part of my property to cover it? What happens when that sale occurs at a much lower price, due to my need to liquidate, did that lower the prices of all the houses in the…

> did I just magically make $900k?

Yes you did, because now you can mortgage your real estate for that value and live in luxury. This is how most people make a good living, not by working or investing.

Re: Exit Tax: Leave Germany before your business gets big

#298

Post by Wobbles42 »

trinix912 wrote: post #243
jeofken wrote: post #194

Earlier quoted context omitted.

Norway has a high wealth tax (it’s gonna be 1.1% of total wealth per year in normal cases), high capital gains tax, and an exit tax treating moving abroad as a capital gains event. This means, if you start a not-yet-publicly-listed company, get investment at a high valuation (on paper), you must pay wealth tax as if you had that money liquid in your own name. But you don’t have it liquid, it’s yet just a valuation of…

> This means any Norwegian trying to start eg a fast growing software biz must relocate to Sweden if they want to be close to home, or Switzerland more realistically, as swedens top income tax bracket is >50%. There's nothing stopping them from doing that in Norway, they just have to pay their dues. Which are nowhere near the rate of those in a real communist system that people are so quick to label it as. I find it…

What is stopping it is the fact that the "wealth" they are being taxed on doesn't actually exist, so by starting a company and getting investment you create tax liability that is impossible to pay.

Early stage companies have a high valuation on paper as an artifact of selling small amounts of equity for relatively large sums of money. This leaves you with purely theoretical wealth in the form of equity which you have not yet sold, and potentially can't sell.

As a concrete example, let's say your tax rate is 15%. If you start a business, and give an investor a 10% stake in that business in exchange for $1M, your remaining 90% stake in the company is now worth $9M. Congratulations, you're wealthy! Now you need to "pay your dues" of 15% of that $9M... good luck with that. You are now bankrupt and deeply in dept to the government.

Re: Exit Tax: Leave Germany before your business gets big

#300

Post by jmyeet »

GardenLetter27 wrote: post #244
jmyeet wrote: post #92

The developed world is increasingly facing a funding crisis brought on by this propaganda that if we tax corporations and the very wealthy then they'll leave. One of the most farcical examples of this is the decades-long race to the bottom on business taxes and incentives between Kansas City, Missouri and Kansas City, Kansas. For the non-Americans out there, this is basically one city but it sits at the border of two…

Why are taxes so high though? Like in Sweden I'd pay literally 80% tax on extra sole trader income - 30% employer tax, 30% income tax, 20% high income tax. But there is no Swedish moon base, or ultra high speed rail, etc. - where does it all go? We have higher taxes but less infrastructure investment than a century ago.

Because we don't tax the people with all the money. It's why someone making $100,000 a year loses probably half of it or more to federal, state and local income taxes, property taxes, sales taxes, etc and Warren Buffett pays 3%.

There is a persistent idea that we cannot or should not tax wealth because it's "unfair". We certainly can. We do it all the time. Property taxes, depending on your jurisdiction, are either taxed based on assessed value or whatever the assessment method is correlates strongly to property value.

I can't speak to the specifics of Sweden and its tax base but in general a key problem in the developed world is the skyrocketing cost of housing. Why is this a problem? Because it's an input into the cost of everything. It makes your labor more expensive, which in turns makes what they do more expensive. I have heard getting an apartment in Sweden is rather difficult. Stories of having to register at birth and waiting 20+ years. I could be wrong.

But everywhere in the developed world has high housing costs (in terms of real income) because we constrain supply, subsidize demand (particularly to the very rich) and allow people to hoard housing.

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