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Who died and left the US $7B?

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Re: Who died and left the US $7B?

#461

Post by CPLX »

logifail wrote: post #425
CPLX wrote: post #287

Earlier quoted context omitted.

We (almost) invariably tax money when it changes hands. Like if you own something and then I own it, there's a tax. If I give something of value to someone else, the government takes a cut. There's a ton of nuance there, sometimes intended to avoid certain negative consequences that feel like double taxation or that provide peverse incentives. But that's the general premise. If you pay taxes on your income and then u…

> We (almost) invariably tax money when it changes hands. Like if you own something and then I own it, there's a tax [..] But that's the general premise. I appreciate HN is USA-centric, but over on this side of the pond it's nowhere near as simple as that. > If you pay taxes on your income and then use it to buy something from me, I have to pay taxes on it too. That's my income now. Except that companies - even one p…

> I appreciate HN is USA-centric

We're commenting on a specific article written about the US tax system. The term "US" is in the title of the post I am commenting on.

Re: Who died and left the US $7B?

#462

Post by kemitche »

sailingparrot wrote: post #316
Salgat wrote: post #297

Earlier quoted context omitted.

I don't get why people say a tax on unrealized gains is not feasible. All it means is that a percent of your investment becomes "realized" every year and you sell a portion of your investment to cover it. So if you have a billion dollars in stocks and you have to realize 10% of it in a year, you sell enough stock to cover the $20 million and the other $80 million becomes realized and never taxed again (only future ga…

How would you implement that in startup world for example? It's very common for startups to be valued at ~20M$ right out of the gate in seed stage, not because the company is worth $20M, but because at $20M valuation it allows the VCs to invest say $4M and only take 20%, no one want the VCs to take more (not even the VCs themselves) because otherwise it would mean the founders are left with too little equity too soon…

Minimum thresholds, and exceptions for less liquid assets (private equity) - ideally, again, coupled with thresholds.

The same way we have exceptions like CA Prop 13 for increasing property taxes.

These problems aren't impossible to solve. It's wild how people will find any tiny excuse to give up on making a change to try and make tax code more fair. If there are edge cases that a blanked change to the code makes worse, that's NOT a reason to just throw our hands up and say "whelp, can't make changes" - it just means we need to add a bit more nuance.

Re: Who died and left the US $7B?

#463

Post by CPLX »

AnthonyMouse wrote: post #452
Negitivefrags wrote: post #366

Earlier quoted context omitted.

The main concern with this is how do you actually get the records of what the cost basis was from someone who is dead?

That isn't really the main concern. It's really a question of alienability. If your great grandfather invested in something a hundred years ago and now 99% of its value is appreciation (or inflation), you may or may not want to continue investing in it. If you do, the step up in basis doesn't really matter because you're not going to sell it anyway. But if you now think it's a mediocre investment, you may be inclined…

> There are probably better ways to handle this, but "delete it and replace it with nothing" is not one of them.

Why not? Why do I care about someone being deprived of a portion of some investment his great-grandfather made?

If I get money from some relative who invested in stuff and then you get money from working really hard in a way that someone thought valuable so they gave you money for your work, why should you pay taxes on that money while I don't pay taxes on the money I got from my dead relative?

Are we trying to incentivize people to be born to families that already have money or something? Like are we afraid that if we don't do this, we'll be creating incentives for people to get born into poor families instead?

Re: Who died and left the US $7B?

#464

Post by dixie_land »

eli wrote: post #355
_bin_ wrote: post #162

Earlier quoted context omitted.

This is something people love to rage about, yet it's not one with an obvious fix. The counterpoint is that this leaves money invested, which means others invest in other things, and still entails interest payments. It exists in part because you don't want someone who inherited his parents' house and wants to move in to go broke trying to pay taxes, or have to re-mortgage it, with an even stronger case with family fa…

These are just generic anti-tax arguments. Yes, if you pay your taxes you will have less money. And maybe you would have used some of that money to do good things. Oh well. I don't think anyone is seriously suggesting you shouldn't be allowed to borrow against assets. That isn't even the problem. The problem is that you can go your whole life without paying taxes on gains of those assets, then pass them on to your he…

Why would capital gains be taxed in the first place? It's simply double taxation on the income

Re: Who died and left the US $7B?

#465

Post by MisterBastahrd »

Slava_Propanei wrote: post #387
SR2Z wrote: post #358

Earlier quoted context omitted.

Boo. That's not what's at stake here; people don't wanna pay taxes that are fairly owed to the government.

The asset has not moved outside the family, has not been sold, no profit on sale has been realized. You think a profit transfer has been made, because you think in terms of atomized individuals with no family.

Citizens are taxed as individuals, not families. A person did not have assets, and now they do. I don't care that the land was "in their family." If they are even decent at managing their assets, then they will have more assets when they die than when their parents did. And if they don't, then it's not my concern. I don't believe in government policies to perpetuate generational capital wealth, and I will vote against them as long as we have a system where money can be used to influence the government.

Re: Who died and left the US $7B?

#466

Post by ac29 »

Negitivefrags wrote: post #366
eli wrote: post #355

Earlier quoted context omitted.

These are just generic anti-tax arguments. Yes, if you pay your taxes you will have less money. And maybe you would have used some of that money to do good things. Oh well. I don't think anyone is seriously suggesting you shouldn't be allowed to borrow against assets. That isn't even the problem. The problem is that you can go your whole life without paying taxes on gains of those assets, then pass them on to your he…

The main concern with this is how do you actually get the records of what the cost basis was from someone who is dead?

Brokers have been required to track costs basis information since 2011. That doesnt really help for assets purchased before then, so estate executors would need to find records for transactions before then. The IRS will generally assume a costs basis of zero until proven otherwise.

Re: Who died and left the US $7B?

#467

Post by supplied_demand »

gperkins978 wrote: post #266
witchammer wrote: post #225

Earlier quoted context omitted.

> The state of nature is no tax > You don't get to argue from the point that your preferred taxation regime is simply how things should be Those two statements seem mildly contradictory.

The state of nature has no schools, no water, no sewer and no police. If one is going to live in a civilized nation, he should pay his share of taxes. Capital gains is 15%. That is not an outrageous amount. Everyone should pay because everyone benefits. One is free to leave and live in tax shelter principality or Sultanate. There is a problem with high taxes on earned income, but anyone complaining about the 15% capi…

==most of the US has easily avoided the self-created problems of California and New York city.==

Two places which produce an outsized share of the country's businesses and wealth? Seems like they are doing something right.

Re: Who died and left the US $7B?

#468

Post by supplied_demand »

mbrumlow wrote: post #279
consp wrote: post #235

Earlier quoted context omitted.

No tax in the wild? In my view, sure there was: you get water and share it, the other guy hunts and shares it. The fact no centralised system existed does not mean no tax on the community was levied in some way.

I don’t believe sharing was all that common. But the difference in your story is voluntary sharing. Once the hunter demands water for meat it becomes an exchange, and is the basis of our capitalist society. Taxes in that system would be more like 10 men who did not hunt or gather demanded you give them food and water or they would beat your face in.

==Taxes in that system would be more like 10 men who did not hunt or gather demanded you give them food and water or they would beat your face in.==

This seems a little dramatic. Are the 10 men demanding food and water also building roads, cleaning the water, removing waste, educating children, protecting collective assets, or any of the other things that Governments do with collective taxes? If not, the analogy falls apart.

Re: Who died and left the US $7B?

#469

Post by AnthonyMouse »

eli wrote: post #355
_bin_ wrote: post #162

Earlier quoted context omitted.

This is something people love to rage about, yet it's not one with an obvious fix. The counterpoint is that this leaves money invested, which means others invest in other things, and still entails interest payments. It exists in part because you don't want someone who inherited his parents' house and wants to move in to go broke trying to pay taxes, or have to re-mortgage it, with an even stronger case with family fa…

These are just generic anti-tax arguments. Yes, if you pay your taxes you will have less money. And maybe you would have used some of that money to do good things. Oh well. I don't think anyone is seriously suggesting you shouldn't be allowed to borrow against assets. That isn't even the problem. The problem is that you can go your whole life without paying taxes on gains of those assets, then pass them on to your he…

> Yes, if you pay your taxes you will have less money.

The issue is that it can cause you to have less than zero money, and be forced to sell (possibly illiquid) assets solely in order pay the tax. This is kind of a major deal, e.g. you have an asset worth $20M, but not if you have to sell it right now because it would take time to find the right buyer, so instead you're forced to sell it for $8M to the only person who will buy it immediately. Some assets may not even be possible to sell in the current year, e.g. because the law requires the owner to have some specific license but the only other current licensees are rightfully prohibited from buying you out by antitrust laws. Not to say that the resulting market consolidation would be a good thing when that isn't the case.

> Your heirs should have the same cost basis as you did. And so if they sell they have pay the taxes that you never did.

What this is really encouraging is that they never sell. Which isn't even obviously going to increase tax revenue. If the daughter inherits the business and runs it successfully for a few years and then sells it for 25% over its value at transfer, the government gets tax on the 25%, and then going forward gets the taxes from the new, more productive investment she sold that one in order to buy. And the latter isn't just capital gains; better investments would also be employing more people (payroll taxes, fewer unemployment claims), paying more property taxes, etc.

If you make it so the tax basis stays low so a sale would have to pay tax on 95% of the value instead of 25%, she doesn't sell, you don't even get the tax on the 25% and the tax base stays lower because she doesn't switch to the more productive investment.

Re: Who died and left the US $7B?

#470

Post by jewayne »

dixie_land wrote: post #464
eli wrote: post #355

Earlier quoted context omitted.

These are just generic anti-tax arguments. Yes, if you pay your taxes you will have less money. And maybe you would have used some of that money to do good things. Oh well. I don't think anyone is seriously suggesting you shouldn't be allowed to borrow against assets. That isn't even the problem. The problem is that you can go your whole life without paying taxes on gains of those assets, then pass them on to your he…

Why would capital gains be taxed in the first place? It's simply double taxation on the income

I always ask myself, "What was a government service necessary in order to obtain this money?" Since there are no capital gains without all manners of law enforcement, the answer is yes here. A capital gain is not a tax on the original income. It's a tax on the capital gain, which would be impossible without the rest of us.
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