Are super-rich people just better at making money? • Hacker News Board

Re: Are super-rich people just better at making money?

#451

Post by WalterBright » Thu, Dec 22, 2022, 7:07 PM UTC

gjulianm wrote: post #229

WalterBright wrote: post #92

Earlier quoted context omitted.

> simply because they had more money It's because they took on more risk. The bigger the risk, the bigger the payout. The safer the investment, the lower the payout. > do not share fairly the value created between workers and owners. They do if one considers risk.

There are several things here. One is that you're only considering direct monetary risk. For example, imagine a person that starts a business with X dollars, which will usually be a percentage of their wealth. This person hires an employee at a salary that's barely above their living expenses, but with the idea to ascend as the company grows. If the company goes bust, who loses more? The owner still has money, the pe…

Losing your job is not nearly the same as losing millions of dollars. You can just get another job. Those millions will be very hard to replace. Even if you get a 6 figure job, how are you going to get those millions back?

> If I have a hundred dollars in the bank I cannot really access any investment opportunity

robinhood.com says hello!

> not all people have the same relative expenses

Right. But that's their problem, not the company's problem. If I sell Bob and Ted each a coffee for $10, and Bob is right and Ted is poor, they still each get charged $10. I don't do a background check and pour over their financial statements in order to determine how much to charge them.

Re: Are super-rich people just better at making money?

#452

Post by WalterBright » Thu, Dec 22, 2022, 7:09 PM UTC

naasking wrote: post #404

WalterBright wrote: post #81

Earlier quoted context omitted.

> transfer wealth to inheritors with basically no tax. Other than 40% federal estate tax and 20% Washington state tax, which is right next to zero.

> Other than 40% federal estate tax and 20% Washington state tax, which is right next to zero. Took me 5 seconds to Google this: https://smartasset.com/taxes/5-ways-the-rich-can-avoid-the-e...

Those can wind up deferring taxes, not eliminating them, and still they have exemption limits. The Roth IRA has contribution limits.

Re: Are super-rich people just better at making money?

#453

Post by WalterBright » Thu, Dec 22, 2022, 7:09 PM UTC

bmitc wrote: post #157

WalterBright wrote: post #81

Earlier quoted context omitted.

> transfer wealth to inheritors with basically no tax. Other than 40% federal estate tax and 20% Washington state tax, which is right next to zero.

Except there are abuses of Roth IRAs and other cases where tax can be completely avoided. I think it was only recent that some limitations of Roth IRAs were put in place for heirs, but such investment vehicles do exist that do not get hit by the normal estate taxation processes.

Roth IRAs have contribution limits.

Re: Are super-rich people just better at making money?

#454

Post by WalterBright » Thu, Dec 22, 2022, 7:09 PM UTC

janalsncm wrote: post #126

WalterBright wrote: post #104

Earlier quoted context omitted.

Loans are not income.

There is no law of nature that says only income can be taxed. Loans could be taxed.

How about taxing your mortgage, then?

Re: Are super-rich people just better at making money?

#455

Post by WalterBright » Thu, Dec 22, 2022, 7:11 PM UTC

matthewdgreen wrote: post #293

brianwawok wrote: post #245

Earlier quoted context omitted.

After you die your estate sells stocks

Does the estate pay capital gains on those stocks, or can it take advantage of stepped-up cost basis rules to avoid those as well?

The estate gets a stepped up cost basis on the date of death. And then you pay the 40% federal inheritance tax and the 20% state inheritance tax on the total value at the date of death.

Re: Are super-rich people just better at making money?

#456

Post by mrguyorama » Thu, Dec 22, 2022, 7:11 PM UTC

smilekzs wrote: post #21

bmitc wrote: post #3

To solve all this, it's pretty simple, and the U.S. actually used to do it: heavily tax the super rich. Heavy taxation and then appropriate use of those funds for education, R&D funding, infrastructure, etc. is actual trickle-down economics. And mega corporations should be heavily taxed instead of holding the country economically hostage. They jumpstart their companies off of government funding and R&D and then act a…

One thing I've noticed consistently, is when politicians talk about "taxing the wealthy", they almost always follow that with "earning more than $xxxk a year". This is conflating wealth with income. Being within this tax bracket myself, I do not deny that I am biased, but I do hope this bullshit gets called out hard whenever someone brings up yet another underhanded measure to milk us (typical SFBay SWE) above and be…

FYI, if you make several hundred thousand dollars a year, because you are a SFBay SWE, you are SIGNIFICANTLY different from an average american, and you should realize that. You ARE the wealthy that would and possibly should get taxed. It's not poor people's fault California refuses to do anything about having enough housing. It's not poor people's fault that google and facebook require you to live in california for no reason. Making hundreds of thousands of dollars in salary per year is a very privileged position.

Don't get mad at average americans trying to make the world a better and more fair place, get mad at google and facebook that make several million dollars off the code that you write and kick back a pittance of a salary, and coordinate with each other to keep your compensation low. Even at $400k a year, you are literally being underpaid.

Re: Are super-rich people just better at making money?

#457

Post by WalterBright » Thu, Dec 22, 2022, 7:12 PM UTC

dsfyu404ed wrote: post #351

danny_codes wrote: post #240

Earlier quoted context omitted.

Before Kennedy it was 91%. Imo we are well bellow the Laffer curve.

>Before Kennedy it was 91%. To which the common retort is "but nobody actually paid that because prior to the tax code simplifications of the 70s you could trivially reduce your burden in all sorts of ways"

Not only that, the tax avoidance schemes required investing in tax shelters, which were usually very poorly performing investments. When Reagan exchanged the lowered tax rates for elimination of those tax shelters, it allowed capital to flow instead to productive investments, which helped the economic growth.

Re: Are super-rich people just better at making money?

#458

Post by WalterBright » Thu, Dec 22, 2022, 7:13 PM UTC

ti00 wrote: post #343

matthewdgreen wrote: post #293

Earlier quoted context omitted.

Does the estate pay capital gains on those stocks, or can it take advantage of stepped-up cost basis rules to avoid those as well?

I'm not an expert, but my reading of the IRS's FAQ [1] is that the cost basis of inherited assets gets reset to the fair market value of the assets on the date of death. 1. https://www.irs.gov/faqs/interest-dividends-other-types-of-i...

You're right, and then you pay the inheritance tax which is more than the capital gains taxes would have been.

Re: Are super-rich people just better at making money?

#459

Post by mrguyorama » Thu, Dec 22, 2022, 7:15 PM UTC

yamtaddle wrote: post #418

feet wrote: post #400

Earlier quoted context omitted.

You can look up the history of company towns

You load sixteen tons, whattaya get? Another day older and deeper in debt St. Peter don'cha call me, 'cause I can't go I owe my soul to the company store - Merle Travis, "Sixteen Tons" The TL;DR of why this is bad is that when employees are paying, or are indebted to, their employers, even in a roundabout way, it's really easy for that relationship to become very abusive. The company towns also often payed in scrip,…

>The robber-baron version is basically the thing you see in capitalist-dystopia sci fi like The Outer Worlds, but it actually happened.

Also a significant portion of the country seems to be actively attempting to let it happen again. High school made them read The Great Gatsby and they all imagine themselves as Gatsby and the other obscenely wealthy people instead of the 99% of awful and perpetually dying lives most people experienced.

Re: Are super-rich people just better at making money?

#460

Post by 0xmarcin » Thu, Dec 22, 2022, 7:16 PM UTC

So can this be generalized to other collectable items? If as a hobby I collect, sell and exchange X does it mean I will lose money in the long run? Recently there was a few articles about investing in Lego sets, from this article POV it may not be that good investment, the future price is hard to estimate and probably you will guess price increase/decrease about half of the time right. So using this model you will lose money in the long run. Or did I miss something?

Returning to the simulation, the coin experiment can be explained using different model: Imagine position X on a line: |A A A A X B B B B B B B B B B B|, X can move either left or right by the amount specified by the rules of the game. But since one person is poorer the boundary | is closer to X. X is doing a random walk, so it will move with exactly the same probability e.g. 5 positions left or 5 positions right. But for the poor player 5 positions to the left means he is left with no money to play again, and for the rich player it means he lost some of his advantage. If the difference is huge like x100 the poor player has basically no change at winning at all. So this game is only fair if A and B have similar amount of money.