We are publishing the tax secrets of the .001% • Hacker News Board

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

#341

Post by ineptech » Tue, Jun 08, 2021, 6:24 PM UTC

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…

"Well, this tax might still hit someone at the upper-upper-end of the middle class if they live in the fastest-appreciating real estate market in history" seems equivalent to admitting that it does not hit the middle class generally.

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

#342

Post by onlyrealcuzzo » Tue, Jun 08, 2021, 6:26 PM UTC

fairity wrote: post #109

One of the primary mechanisms for tax avoidance is taking out loans against appreciated capital assets to avoid realizing capital gains. What's stopping the average citizen from exploiting this tax avoidance strategy? For example, every time I try to submit an order to sell stock that results in short-term capital gains, my broker should be asking me whether I want to take out a collateralized loan instead. If there…

I've been saying this for years. Low interest rates are like a triple handout to the extremely wealthy.

1) pump up asset prices.

2) lower the rate at which you can borrow against unrealized gains to make avoiding taxes more attractive.

3) people use this savings to buy more assets. Repeat step 1. Virtuous cycle.

I can't go to a bank and get a loan against $1M in my 401k at 2% interest. But I know people with $50M+ that are doing this. It's absurd.

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

#343

Post by heavyset_go » Tue, Jun 08, 2021, 6:26 PM UTC

dhd415 wrote: post #132

dangus wrote: post #106

Earlier quoted context omitted.

You’re not actually talking about the “moderately wealthy.” Just because billionaires are insanely wealthy doesn’t change the fact that a household making $500,000 is still incredibly wealthy. There’s already an exemption for capital gains tax on the sale of primary homes. $500,000 for married couples, and you can remove the cost basis and cost of improvements from the equation. In other words, almost nobody is taxed…

>>A household that makes $500k on a good year is actually in the 1% statistically. They have left the working class long ago. They could work for about 7-10 years in their career and retire with an above-median salary (withdrawing following the 4% rule) in perpetuity. That is by definition not the working class: that family barely has to work in order to secure a lifetime of comfortable living. The "in a good year" q…

> It's not uncommon to get a windfall (stock option vesting cliff, inheritance, capital gains, etc.) that boosts income in a single year to many multiples of one's typical income

Estate taxes don't kick in for estates worth less than $11.58 million and most states make immediate family exempt from all inheritance taxes.

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

#344

Post by varelse » Tue, Jun 08, 2021, 6:26 PM UTC

whiddershins wrote: post #92

Every time someone tries to make a tax targeting the ultra rich, it ends up hurting the moderately wealthy instead. Every. Single. Time. The worse tax situation is always the person who makes 500k in a good year, or sells a house they held for 25 years which went up a bunch in value. I suspect this is a significant factor in social mobility. Our tax system is punitive to people who try to leave the working class.

Nothing like a barrier to entry to the top 1% to keep out the rabble! But yes, you've discovered the crab pot cheat code that will continue to keep things exactly where they've been and they will remain. Go ahead and propose a 1% tax on wealth beyond $50M. Even make sales to pay that tax 100% tax-deductible. It won't happen. Or how about a 50% inheritance tax on wealth beyond $100M? You're not getting that either when there's a sweet middle to upper middle class pile of Quatloos to mine and they don't have enough money to hire the right people to make that problem go away.

But I'm starting to think they need their own PAC and they could afford that.

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

#345

Post by mlac » Tue, Jun 08, 2021, 6:26 PM UTC

lmilcin wrote: post #28

mlac wrote: post #23

Earlier quoted context omitted.

I would also think that this makes neighborhoods less financially diverse. I can’t see someone with a higher than average income moving into a neighborhood knowing that their neighbors might make 1/4th as much. It puts a target on them.

You obviously haven't been to Finland. In Scandinavia, the approach to other person earning couple of times more than you could be summarized by "good for you".

That's good it works that way in Finland, but my point was focused on the United States. I don't think making everyones' income public would suddenly make those in the US think like those in Finland. I also think the social services in Finland raise the bar for everyone - everyone has more basic services than in the United States, so it starts off more equal.

This happens with any disparity - education, income, wealth. Differences in these cause some people to act differently. I've met many people who think earning $100,000 a year qualifies you as "rich", and there are a lot of people who think they won't have anything in common with someone who is educated beyond undergrad.

I imagine it would suddenly be a metric on Zillow and Realtor - "average neighborhood income". People would self-select based on that, making neighborhoods less financially diverse. No one would want to be seen as the broke person in the neighborhood, and no one would want to way over-buy the neighborhood. Maybe you would, but people would "know" whether you could afford to live there or whether you were taking a house from someone else when you could afford to live in a nicer place. Either way, it would not be comfortable, not to mention if you lived somewhere for a while and your career took off - you'd then maybe out earn the neighborhood and be forced to move, rather than be able to remain and blend in.

On my earlier comment, I guess 1/4 wasn't the right ratio. My point was more that someone making 200k may not move into a neighborhood where the average income is 50k, when they otherwise would have, because they would be viewed very differently among neighbors and it would be hard to blend in. This would lessen tax revenue for low-income areas as people would be less willing to move in.

In general, talking about salary in the States is taboo, but not among hourly workers. If you hear a conversation about work between hourly workers, it generally comes out pretty quickly what they are making. I read an article stating it happens for price discovery - they mention it regularly so they can charge the right rates and work at the highest paying location.

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

#346

Post by stmfreak » Tue, Jun 08, 2021, 6:26 PM UTC

ineptech wrote: post #252

whiddershins wrote: post #92

Every time someone tries to make a tax targeting the ultra rich, it ends up hurting the moderately wealthy instead. Every. Single. Time. The worse tax situation is always the person who makes 500k in a good year, or sells a house they held for 25 years which went up a bunch in value. I suspect this is a significant factor in social mobility. Our tax system is punitive to people who try to leave the working class.

I don't think you're describing an obstacle to change, you're describing the mechanism of change avoidance. Compare: "Gosh, every time we try to tax the wolves, it ends up hurting the sheep as well. Why can't our 100% wolf, 0% sheep Congress get this right? I guess it's just a hard problem!" The solution is not to give up, the solution is to actually tax the rich more. Also, your examples are awful: paying taxes on t…

No. The solution is for government to spend LESS. There is no amount of tax that can out earn Congress’ appetite for pork, kickbacks, and voter bribery through wealth transfer.

The only reason we are told to see the illiquid wealth of billionaires as a problem is the lie that Congress can spend that money better.

They cannot.

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

#347

Post by ausbah » Tue, Jun 08, 2021, 6:27 PM UTC

WalterBright wrote: post #257

The top 1% contribute 38.5% of Federal income tax revenue.

the top 1% own 31% of all the net wealth in the US, which isn't the same as income - but gives a good idea of how disproportionate their share is

38.5% seems too low

https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr...

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

#348

Post by askafriend » Tue, Jun 08, 2021, 6:27 PM UTC

ryandrake wrote: post #307

rllearneratwork wrote: post #265

Earlier quoted context omitted.

have you heard about different cost of living in different places? What if the person plans to fund himself/herself in the retirement and pay for kids college rather than expecting all that "for free" from the government?

There is no metro region on Earth where $1M/year can be considered middle class.

I'd say in SF, you need 500k to be reasonably middle/upper-middle class if you have kids (let's say 2).

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

#349

Post by zepto » Tue, Jun 08, 2021, 6:28 PM UTC

dougmwne wrote: post #320

zepto wrote: post #281

Earlier quoted context omitted.

Why would they need omniscience?

Probability. Let's say a state actor had access to a whole pile of tax returns and wanted to manipulate them to change the conclusions ProPublica would draw. The state actor changes half the data points. Let's say ProPublica was able to check an average of 3 data points on those 50 individuals they reviewed. The data point could have either been manipulates or untouched. I'd model this like a coin flip and say that i…

This is a straw man.

Firstly we have no idea how many of the 50 individuals data were public or not. All public data can be discounted since the state actor can just copy it.

Secondly, for the private data, the definition of ‘private’ is unspecified. It really just means not part of a published record. If propublica has access to it, then why couldn’t someone else?

I agree that if there were 150 separate sources with data not disclosed anywhere else, it would be impossible to guess.

But that’s just a made up scenario.

There could be many correct records that are public, and one or two that are private but available to (or even provided through another channel of) the state actor.

As long as the fake records are not part of the public or private data propublica already has, there would be no way to verify them.

This of course assumes that propublica’s list of records itself is kept securely.

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

#350

Post by xienze » Tue, Jun 08, 2021, 6:28 PM UTC

cletus wrote: post #263

xienze wrote: post #256

Earlier quoted context omitted.

> Gains on that property deferred for up to 25 years. Well yeah, before that point it hasn’t been sold, so paying taxes on unrealized gains on what the house “should” be worth is bullshit.

I agree, but my point is that this is a favourable tax treatment (which it is) because it doesn't have to be that way.

How is not charging someone tax on unrealized gains some special, favorable agreement? It's common sense for physical assets.