How to convert between wealth and income tax • Hacker News Board

Re: How to convert between wealth and income tax

#561

Post by didgetmaster » Sat, May 23, 2026, 1:38 AM UTC

maxerickson wrote: post #502

kccqzy wrote: post #241

Earlier quoted context omitted.

On the other hand, almost a majority of people already pay no federal income tax anyways. Mitt Romney mentioned a number of 47% during his presidential campaign and that number was mostly true. https://www.politifact.com/factchecks/2012/sep/18/mitt-romne... People love to talk about the marginal tax rates but not the average tax rates. And I think that’s right because the conversation should be focused on the wealthi…

Pretty cool that the taxes high earners stop paying are not considered income taxes. (Social security and Medicare)

Social Security tax is the only tax that has a limit. Medicare tax applies to all wages and high earners even pay an extra percentage.

SS tax has a limit because benefits are also limited. It is a forced retirement plan where if you live long enough, you might get back what you paid in.

Re: How to convert between wealth and income tax

#562

Post by lazide » Sat, May 23, 2026, 1:43 AM UTC

analog31 wrote: post #541

NoMoreNicksLeft wrote: post #357

Earlier quoted context omitted.

>I'm not overlooking the possibility that such a tax structure could create an effective wealth cap at some level. No, I think what that does is create an effective corporate decimation. No one has a billion in cash that I've ever heard of. When you say "tax the billionaires of their wealth" because this billionaire has $1 billion, you're talking about his shares right? Maybe in one company, maybe across many. Is he…

If someone sells the stock, someone else buys it. The value is still the net present value of future earnings. This is a redistribution of wealth, not a decimation. The wealthy can still earn more if they want to.

When market cap goes down because overall valuation does, what do you think is happening?

Valuation hasn’t been tied or related to earnings for top stocks in at least a decade.

It isn’t ’wealth redistribution’.

Removing half or more of market demand isn’t going to be pretty.

Re: How to convert between wealth and income tax

#563

Post by raincole » Sat, May 23, 2026, 1:49 AM UTC

throw0101a wrote: post #490

bagels wrote: post #456

Earlier quoted context omitted.

Homeowners already pay a wealth tax.

> Homeowners already pay a wealth tax. If you're talking about property taxes, then renters pay that as well through their rent (which passes through the landlord before getting to the city/county). * https://realestatemagazine.ca/do-residential-tenants-pay-pro... And is some (many?) cases higher rates than owners: * https://www.renx.ca/renters-often-pay-higher-municipal-taxes...

Renters will always pay one way or another. You can name it wealth tax or property tax or house tax. It doesn't matter -- the result will be higher rent.

Re: How to convert between wealth and income tax

#564

Post by opo » Sat, May 23, 2026, 1:49 AM UTC

__turbobrew__ wrote: post #461

opo wrote: post #182

Earlier quoted context omitted.

>...Additionally, wealthy people can use securities as collateral for near zero interest lifetime loans which also bypass having to pay income tax. This is just Internet mythology. The IRS would go after such arrangements very quickly - the IRS has the Applicable Federal Rate for loans. Though this really isn't an issue with banks as they are not charities and tend to want to make money.

It is called “Buy, Borrow, Die” and it is a very real thing.

The buy, borrow, die idea came from McCaffery in the 90s which was before various IRS sections like 1259 and 7701(o) were codified.

Go get a calculator - if you took out a loan and had the interest set a the minimum of the AFR, what would it compound to in 30 years? It would obviously be much higher than just selling stock and paying capital gains on it.

The ultra rich do take out loans, and these loans do get repaid, and that money has to come from somewhere. Go google something like billionaire stock sales to see examples - if they all could just say, "Thanks for the zero percent interest loan! I'll pay you back in 30 years in my estate!" - I think they would have.

Re: How to convert between wealth and income tax

#565

Post by dh2022 » Sat, May 23, 2026, 1:50 AM UTC

Manuel_D wrote: post #434

dh2022 wrote: post #412

Earlier quoted context omitted.

Debt is usually rolled over if the billionaire is still rich (banks will do that for fees). The only expenses are the interest charges- which were small 3 years ago but larger now because of how interest rate increased. Re: estate taxes - almost no ultra rich pays them, even without surviving wife. According tom Garry Cohn (former big kahuna at Goldman Sachd and former treasury something or other in the first Trump a…

As per your linked article, they mainly either give away their money to charity, or they set up trusts. When beneficiaries receive money from the trust, it's taxed as income.

You missed this part in the article: “ Estate tax planning has become so effective that wealthy families can now easily pass large portions of their estates to their heirs without paying the tax”

The beneficiaries then set up their own tax avoidance schemes. With the effect only rich people with poor tax planning skills, to quote Gary Cohn again, end up pay the estate tax.

Re: How to convert between wealth and income tax

#566

Post by dh2022 » Sat, May 23, 2026, 1:51 AM UTC

WalterBright wrote: post #470

dh2022 wrote: post #407

Earlier quoted context omitted.

If the ultra wealthy move out a few people will lose their jobs (their family office, some accountants, some property managers will work the same job for someone else). But overall people will not be worse off. We have been doing this exact experiment in Seattle sine 2024 when Bozos moved out. And last month Howard Schultz moved out as well. The sky did not fall. Another example- did the average Londoner get better o…

Starbucks is moving its headquarters from Seattle to Tennessee. Many other businesses that are not large enough to interest the newspaper are moving out as well.

Like I said: the sky is not falling.

Re: How to convert between wealth and income tax

#567

Post by Dylan16807 » Sat, May 23, 2026, 1:51 AM UTC

lazide wrote: post #498

Dylan16807 wrote: post #485

Earlier quoted context omitted.

> No one has a billion in cash that I've ever heard of. What's the biggest amount anyone has in treasury bonds or gold? You could easily liquidate a ton of that. > but what happens when he only gets $70mil for it because the stock price tanked? Should he sell more, until he comes up with that original 20% of his "billion"? If the stock tanks that much while he's selling, then the company is only worth about $300 mill…

If owning stock (passively) all the sudden got taxed to any notable degree, you’ve just dramatically changed the value calculus for most of the world economy at this point. It would be shocking if the price didn’t crash.

That sounds like a one-time thing. Once things stabilize you wouldn't see a big fluctuation every time a CEO has to pay taxes.

Also normal people and the mildly rich and retirement funds and many other big sources of ownership wouldn't be taxed, so I don't see prices actually crashing.

Re: How to convert between wealth and income tax

#568

Post by armitron » Sat, May 23, 2026, 1:51 AM UTC

dh2022 wrote: post #407

jppope wrote: post #312

Earlier quoted context omitted.

> intentionally obscuring the fact that the vast majority of people would pay ~no wealth tax or unintentionally forgetting that the vast majority of people would pay ~no wealth tax. I consider this fine, because proponents of a wealth tax consistently omit that it will ultimately be the middle class who pays the tax... the ultra-wealthy and wealthy can afford sophisticated strategies to render a wealth tax ineffectiv…

If the ultra wealthy move out a few people will lose their jobs (their family office, some accountants, some property managers will work the same job for someone else). But overall people will not be worse off. We have been doing this exact experiment in Seattle sine 2024 when Bozos moved out. And last month Howard Schultz moved out as well. The sky did not fall. Another example- did the average Londoner get better o…

The level of delusional wishful thinking here defies belief. Seattle and all other US "left" strongholds are decomposing and falling apart, with parts of these cities worse off than the third world. Instead of realizing that it's ineffective, incompetent and detached from reality politicians that have brought ruin and misery, you want to hand them even more money.

Brilliant.

Re: How to convert between wealth and income tax

#569

Post by vannevar » Sat, May 23, 2026, 1:57 AM UTC

trollbridge wrote: post #387

kccqzy wrote: post #332

Earlier quoted context omitted.

The main implementation issue with a wealth tax is that it doesn’t at all interact with the capital gains tax. It’s easy to fix the implementation issue by integrating the wealth tax into the capital gains tax (call it unrealized capital gains tax for starters), make the tax refundable when an asset loses value, and netting it against the actual capital gains tax. With this framing, the wealth tax isn’t a new tax; it…

Unrealised capital gains tax requires some way to assess the value of assets. This is a lot harder than it sounds. It already exists in the form of property taxes, which are quite unpopular.

>It already exists in the form of property taxes, which are quite unpopular.

For an unpopular tax, the property tax is remarkably ubiquitous. Are there really any popular taxes?

Re: How to convert between wealth and income tax

#570

Post by topaz0 » Sat, May 23, 2026, 1:59 AM UTC

sokoloff wrote: post #542

topaz0 wrote: post #482

Earlier quoted context omitted.

Which argues in favor of the inheritance tax mentioned. There could be other solutions too -- say, require a virtual wash trade at time of inheritance, so the capital gains from the parent's lifetime are taxed at time of death and the child gets the stepped up basis. Somewhat different than an inheritance tax, but at least not a giveaway.

The full value of the shares (original basis plus step-up [or step-down] in basis) is already part of the estate and so is already subject to the inheritance tax rules. It's just that the exclusion amounts are fairly high, so in practice the tax owed is often $0.

Right, the point of the person you replied to was about the scenario where inheritance taxes are small or non-existent - they literally said step up in basis makes sense when inheritance is taxed meaningfully.