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Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

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Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#471

Post by mac01021 »

gonehome wrote: post #421
mac01021 wrote: post #250

Earlier quoted context omitted.

I don't have a super-well formed opinion about this but I think a wealth tax has some issues that don't get enough attention. Like that the market value of an asset can fluctuate wildly and become untethered from the actual rational value of the asset. So imagine you're Bezos or Musk and you're not trying to be super rich per se but just trying to build a company according to your vision and so you have a bunch of eq…

I think a wealth tax is a bad idea (as described in my comment above), but you can structure equity so that you retain control even without a large holding of shares (see: Palantir, Facebook). Arguably a wealth tax would create an incentive for everyone to do this which I would argue is probably bad since then the company controllers have less skin in the game. Generally I think a wealth tax creates a ton of these pe…

> you can structure equity so that you retain control even without a large holding of shares (see: Palantir, Facebook).

I'm a little confused about this though. If class A shares have all the votes (while most shares are class B shares), what prevents the market from valuing the class A shares at an extremely high value and the class B shares not at all? When the company finally gets big and stops growing, the source of its value to shareholders will be the dividends that it pays and it will be the voting class A shareholders that decide how dividends are allocated.

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#472

Post by tomatocracy »

tonystubblebine wrote: post #6

As a business owner, when taxes are low, I see that as an incentive to pocket profits. But when taxes are high, I see that as an incentive to hide the profits by investing in the future. I know this isn't always the case with everyone. And especially investors have a case that higher corporate taxes reduce the value of their investments, possibly to the point of not making them. But this incentive is so blatantly obv…

This depends a lot on the accounting and tax treatment though. In many industries, that "investment" would be accounted for as capex, and in many countries you don't get an immediate write off against tax for capex but you get it over some approximation of useful life of the assets you've invested in.

There is a strong case for allowing immediate, or faster, write-offs for capex spending in preference to lowering corporate tax rates because of this effect.

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#473

Post by gonehome »

mac01021 wrote: post #471
gonehome wrote: post #421

Earlier quoted context omitted.

I think a wealth tax is a bad idea (as described in my comment above), but you can structure equity so that you retain control even without a large holding of shares (see: Palantir, Facebook). Arguably a wealth tax would create an incentive for everyone to do this which I would argue is probably bad since then the company controllers have less skin in the game. Generally I think a wealth tax creates a ton of these pe…

> you can structure equity so that you retain control even without a large holding of shares (see: Palantir, Facebook). I'm a little confused about this though. If class A shares have all the votes (while most shares are class B shares), what prevents the market from valuing the class A shares at an extremely high value and the class B shares not at all? When the company finally gets big and stops growing, the source…

There’s typically a rule that the shares with extra voting power cannot be sold. They automatically convert prior to sale.

Basically they’ve thought of these things and controlled for them already.

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#474

Post by tim333 »

coliveira wrote: post #53
tonystubblebine wrote: post #6

As a business owner, when taxes are low, I see that as an incentive to pocket profits. But when taxes are high, I see that as an incentive to hide the profits by investing in the future. I know this isn't always the case with everyone. And especially investors have a case that higher corporate taxes reduce the value of their investments, possibly to the point of not making them. But this incentive is so blatantly obv…

This is so hidden in the debate that it is almost like a "secret". The more taxes you have on corporate income, the higher the incentive for corporations to invest in the company, so they can avoid paying taxes. This is good for the economy. On the other hand, lowering corporate taxes also generates a cascade of tax avoidance, since you have higher profits that generate the need for more complex tax avoidance schemes…

The devil's in the detail though - there are other ways to reduce taxable corporate income other than sensible investing. Examples - pay the money out to the directors - use iffy transfer pricing to have the profits appear to be made in some Irish company (see msft, appl) - set the company up offshore owned by a trust (see news corp) - pay the profits out as consultant fees to a company owned by your daughter (no idea who that could be) etc.

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#475

Post by tim333 »

unethical_ban wrote: post #297
sempron64 wrote: post #125

I'm not wealthy enough for a wealth tax to apply, but a wealth tax is a colossal privacy and administrative burden on _every single taxpayer_. Assets must be accounted for when calculating wealth, so the tax service will be required to track and value assets including vehicles, homes, and material good etc. for every citizen to see if the wealth tax would apply to them -- if we didn't report material goods, the wealt…

Like another person said, you look at potential enforcement and assume perfect adherence to a philosophy, or that everyone will be audited the same. They will not. Just like a small business is less regulated than a large one (often), or how smaller incomes are taxed simply while those with more money/more complex assets get audited more - the ultra-wealthy will certainly have more of their assets audited, and yes, t…

What about a startup enthusiast who's started my-hot-startup.com. No revenue yet but might be the next big thing. What's that worth? $0? $10bn? That sort of thing could get messy.

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#476

Post by AnthonyMouse »

question000 wrote: post #459
AnthonyMouse wrote: post #357

Earlier quoted context omitted.

Federal receipts as a percentage of GDP haven't meaningfully changed since WWII. (Which means that they've only gone up in real dollars per capita, because GDP per capita has increased.)

Yeah so taxes have gone down. If you measure taxes with real metrics they've gone down to their lowest level ever.

What are you talking about? As a percentage of GDP, federal taxes have been the same since the 1940s. But real GDP per capita has increased, so real taxes per capita have increased.

And before the 1940s, federal taxes were dramatically lower.

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#477

Post by tick_tock_tick »

mikepurvis wrote: post #390
tick_tock_tick wrote: post #205

Earlier quoted context omitted.

I mean it makes sense socialism removes any real chance of your country being successful so if you think your country has a chance accepting defeat would be horrible.

Doesn't the truth of this hang on what the definition of "success" is? Is ability to produce the occasional Mark Z or Jeff B "success"? Or is success just an upward slope on broad economic indicators like GDP? I think the picture looks quite different if you look at things like quality of life indicators— and then it's (surprise!) nations like Denmark and Switzerland which top the list. I suspect it would be even mor…

Denmark and Switzerland are objectively capitalist systems and have little to no state control of the means of production.

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#478

Post by gamblor956 »

mrep wrote: post #452
gamblor956 wrote: post #420

Earlier quoted context omitted.

Your example doesn't make any sense. With a buyback, you have fewer shares after the buyback. If you "reinvest" in the company you give up all the proceeds you received to buy back the shares that you just sold to the company. But you've paid taxes as a result of the initial buyback so you have less money than you received to reinvest, and now presumably the shares are all more expensive as well. Your position is eco…

> With a buyback, you have fewer shares after the buyback. Not sure who "you" is but the company will have fewer shares outstanding, investors who don't sell will have the same and those investors will also now own a greater % of the company as well as a greater earnings per share. > If you "reinvest" in the company you give up all the proceeds you received to buy back the shares that you just sold to the company I a…

Oh in that case your numbers for the long-term investors in the buyback situation don't make sense. Their stock may be worth on an individual share basis, but their holdings are unchanged in value at best and usually worth less, because the company expended money in buying back the shares.

In most cases in the past decades, buybacks were accomplished using loans rather than profits, leaving the companies in worse financial positions. More than half of the companies that engaged in buybacks in the past decades are either bankrupt, declared bankruptcy in 2020, or are underperforming the market. Only a handful of companies that engaged in buybacks are doing okay, and those companies also issued dividends (see for example, Microsoft).

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#479

Post by gamblor956 »

AnthonyMouse wrote: post #456
gamblor956 wrote: post #446

Earlier quoted context omitted.

The structures are generally the majority of the value of the property. Depends, unless you're talking about very large structures like office buildings, factories, or malls in which case the structures are definitely worth more than the land. For most residential and small-to-midsize commercial plots, it depends on where the land is. In states like HI, CA, NY, and NJ, the land is worth more than the structures on to…

> Depends, unless you're talking about very large structures like office buildings, factories, or malls in which case the structures are definitely worth more than the land. Or large apartment complexes. But isn't that where most real estate investing goes? Detached single family homes are mostly owner-occupied. > Generally, no. Under a triple-net lease, they would not get to deduct these costs because they're not pa…

Or large apartment complexes. But isn't that where most real estate investing goes? Detached single family homes are mostly owner-occupied.

In terms of absolute deals? Yes. In terms of dollar value? Not even close, commercial property far exceeds residential property.

But then the tenant is paying correspondingly less rent, which means less taxable income to the property owner. It's a wash either way.

Generally, no. That's not how triple-net leases work. Tenant pays market value, and maintenance costs on top of that.

It's one of the two options.

In your hypothetical, sure. But in the real world, you don't make enough money in rent from one property to use to pay a down payment on the other, and actual real estate investment companies don't pay down the loans; they take out balloon mortgages and just pay interest on the loans until they sell (or refinance before the balloon). I've done this for enough real property investor clients to know how they actually think.

That's evidence of what I'm saying -- when corporate taxes are high, people move investment from businesses to real estate. Making improvements to real estate is investing in real estate. Lower taxes and they stop because they make more to invest the same money in other businesses.

No, it's not. Because all businesses make more investments in their businesses during periods of high taxes. And specifically in my example, I wasn't referring to real estate investors, but companies that actually manage buildings with the intent of being landlords and making their money from commercial leases, not from selling their buildings.

Re: Media Owned by Wealthy Are Quick to Tell You Wealth Taxes Are a Bad Idea

#480

Post by mikepurvis »

tick_tock_tick wrote: post #477
mikepurvis wrote: post #390

Earlier quoted context omitted.

Doesn't the truth of this hang on what the definition of "success" is? Is ability to produce the occasional Mark Z or Jeff B "success"? Or is success just an upward slope on broad economic indicators like GDP? I think the picture looks quite different if you look at things like quality of life indicators— and then it's (surprise!) nations like Denmark and Switzerland which top the list. I suspect it would be even mor…

Denmark and Switzerland are objectively capitalist systems and have little to no state control of the means of production.

Okay, but that's moving the goalposts. For the purposes of this discussion, most Americans who pull the alarm on "socialism" do so when things like wealth taxes (or single-payer healthcare, or free tuition) are mentioned.
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