A fascinating reddit post was mentioned here about a month ago - about the mildly famous (if a little macabre) 'Buy, Borrow, Die' cycle used by the obscenely-wealthy to - multi-generationally - avoid tax obligations.
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 farms.
And it exists in part because there are so many legitimate cases for doing it, even as a wealthy person: pretend you're a relatively successful businessman whose company has appreciated to $50mm. In this world, you can't just leave your gains unrealized and borrow against them. So you can
- Try to find somebody to sell to, which is a sketchy move. Of course, as your company continues to appreciate, you will be forced to continue reducing your ownership stake. Over time, this will make keeping a family business in the family largely impossible.
- Try to find money to pay taxes. This means less money for R&D, for expansion, for your employees.
- Just dump the whole business to private equity and move on.
These all suck, and the government generally collects money on assets as they move not assets at rest. I see no way to resolve it that isn't suckier than the status quo and so am left with the conclusion that people who agitate for such changes are more resentful of the rich than they are worried about the justice or lack thereof of tax avoidance.
eli 43 days ago [-]
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 heirs who can sell them and also never have to pay those taxes. It's like a big gift from the IRS: your assets that were previously encumbered by unpaid capital gains taxes instantly become more valuable upon your death.
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.
AnthonyMouse 42 days ago [-]
> 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.
eli 42 days ago [-]
I do not understand your first point at all. I’m saying we should eliminate the step up in basis for inherited assets. In what scenario would that force someone to sell something?
Yes their heirs could hold the assets forever and never sell, correct.
AnthonyMouse 41 days ago [-]
> I’m saying we should eliminate the step up in basis for inherited assets. In what scenario would that force someone to sell something?
The proposal has been floated recently that unrealized capital gains should be taxed. This would nominally mitigate a major problem with your proposal, which is that it would heavily discourage people from switching from long-held mediocre investments with a low tax basis to better investments. So they're often proposed together or as the mechanism to remove the step-up in basis, i.e. it's unconditionally stepped up to market value every year but then you have to pay the tax immediately.
But if you tax unrealized gains then you force the sale of assets any time the tax is more than the owner's liquid cash, which is its own major problem.
Whereas if you don't do this, now you haven't solved the original problem that the owner suffers a huge tax penalty for switching from a long-held mediocre investment to a better one.
RHSeeger 42 days ago [-]
> 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.
Eventually, someone will sell it. And, at that point, if the tax basis stays with it, all taxes that weren't payed before are payed then. Having the tax basis transfer with the property doesn't prevent the taxes from being payed, it just (might) defer them. Having the tax basis _not_ transfer gets rid of the taxes (on the currently accrued profit) completely.
AnthonyMouse 41 days ago [-]
> Eventually, someone will sell it.
"In the long run, we are all dead." -John Maynard Keynes
"Eventually" could be a thousand years from now, or after the fall of the nation.
More to the point, compounding interest is a powerful force.
Suppose you have an asset valued at $1000 which is generating annual returns of 10%. You know of another investment that would return 11%, and also employ more people etc. If you had to immediately pay 20% of the $1000 in tax to switch to the better investment, it would take more than 20 years for the extra 1% to recover the cost, and then you might not do it. So instead you keep the original investment and in 20 years if you sell you would have (and owe tax on) ~$6700.
Whereas with a step up in basis, you could sell the investment immediately and invest the full $1000 (instead of $800) in the better investment. Then if you sell in 20 years you would have >$8000 and owe tax on >$7000. So both you and the government come out ahead when you sell in 20 years, to say nothing of the additional people you employed (and who themselves paid more taxes). Preventing that from happening is bad for everybody.
Notice also that this problem gets worse the higher you set the tax rate.
RHSeeger 41 days ago [-]
But by that logic, we should force people to pay taxes on everything they own that goes up in value, on a regular basis.
My point wasn't that "not forcing the sale won't impact taxes at all". It was more to point out that not forcing the sale doesn't magically make the taxes disappear. It just leave them unrealized in the same way they would if the original owner was still alive and owning them. They'll just get paid later.
Your post made it sound like, by not forcing the sale and taxation, those taxes are completely lost the society.
AnthonyMouse 39 days ago [-]
> But by that logic, we should force people to pay taxes on everything they own that goes up in value, on a regular basis.
We don't really know the value of most things when a transaction isn't happening. Also, this would force people to sell things they otherwise wouldn't have merely in order to pay the tax on their value changing, which is six kinds of disaster.
And, that would imply that you would have a tax loss any time the value of something you own goes down, even if you don't sell it. Which would cause government revenue in recession years to be inverted, even though government spending in recession years is usually increased.
> It was more to point out that not forcing the sale doesn't magically make the taxes disappear. It just leave them unrealized in the same way they would if the original owner was still alive and owning them. They'll just get paid later.
They're unrealized gains. They may not ever be realized.
One of the more common ways for this to happen is for the business to eventually go under. Most of them do in the long run. What percentage of companies are over a hundred years old?
More to the point, that's exactly the problem. If you force a large tax event on sale, things get held longer than they ought to, and then (poorly) managed by someone not really interested in that line of business. Malinvestment leads to lower returns, which reduces tax revenue, often by more than the amount of the step up in basis.
In general, anything which is economically inefficient is also going to be bad for government revenue.
Fin_Code 43 days ago [-]
Yep step up in basis reform. Thats actually on the table under Kamala.
Negitivefrags 43 days ago [-]
The main concern with this is how do you actually get the records of what the cost basis was from someone who is dead?
saghm 43 days ago [-]
If the issue is that people are dying leaving behind significant wealth but not documenting this, just make the estate tax 100% on any assets missing documentation like this. I'm sure the lawyers would figure out the rest.
eli 43 days ago [-]
That's effectively already the rule if you sell something and can't figure out the cost basis - it counts as zero.
AnthonyMouse 43 days ago [-]
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 to sell it and invest in something else. Except that you won't if you'd lose a significant proportion of its value to taxes. This is a problem with capital gains taxes in general, but it's especially a problem for anything held intergenerationally (i.e. for a very long time) because not only will the appreciation be large, the inflation by itself would represent most of the value of the "gain". So the step-up in basis is a stupid hack to avoid this and let children make different choices than their parents and grandparents without being punished by the tax code.
There are probably better ways to handle this, but "delete it and replace it with nothing" is not one of them.
CPLX 43 days ago [-]
> 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?
AnthonyMouse 42 days ago [-]
> Why do I care about someone being deprived of a portion of some investment his great-grandfather made?
Because they only get deprived of it if they sell it, so that gives them more incentive not to sell it, but selling it may be more economically productive, and then you lose the positive externalities of the more productive investment and the tax revenue it would have generated, which could by itself plausibly be more than the loss from the step up in basis.
In general the problem is that capital gains taxes when implemented simplistically create a lot of perverse incentives (tax on productive investment is economically undesirable in general and some of the edge cases are especially ugly), and then the tax code gets full of warts that try to reduce the bad incentives/consequences instead of rethinking the structure of the tax.
> 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?
Your dead relative already paid the taxes on any money earned in the equivalent way. Capital gains are on asset appreciation, which is an industrial-sized can of worms.
ac29 43 days ago [-]
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.
lumost 42 days ago [-]
It's also relatively easy to enforce with a generic assertion that all inherited assets must provide proof of adequate payment of capital gains taxes or carry a cost basis equal to the earliest point from which proof can be established.
I'm sure there would be hijinks to avoid this, but for the amounts in question a great deal of legal and accounting hours could be expended to audit the correctness of the returns.
dixie_land 43 days ago [-]
Why would capital gains be taxed in the first place? It's simply double taxation on the income
jewayne 42 days ago [-]
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.
dixie_land 41 days ago [-]
Capital gains do depend on participants of the market and economy in general. But each and every one of them has already been taxed. I simply stating the obvious that money should be taxed exactly once, not so many times.
jewayne 38 days ago [-]
> I simply stating the obvious that money should be taxed exactly once, not so many times.
Why is that obvious? Doesn't a rule like that necessarily create distortions in who gets all the benefits of civilization? For example, in only income is taxed, but not gains on investments, doesn't that mean that working people do ALL the work AND pay ALL the taxes, while people who are rich enough not to work literally do NO work and pay NO taxes?
People like you don't realize that economics involves living, breathing humans.
tutorialmanager 42 days ago [-]
Also, most of my capital gains are due to inflation and not an increase in value.
paxys 42 days ago [-]
Then you really need to pick better investments. Say, any broad market index fund.
zxcvbnm69 42 days ago [-]
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metacritic12 43 days ago [-]
The obvious fix is to not step up basis on death.
The estate tax already means that the estate of a person who dies may need to sell / divide / split stuff to pay the government. There already is no fundamental protection for an asset passing unscathed from a parent to a child. I don't see how not stepping up basis qualitatively changes this.
And your argument of "you want a child to be able to inherit a family business / house and keep the family business protected" is incredibly axiomatic and the antithesis of a tax. While it's inherently consistent, you're making the same general argument as "all taxes are theft".
Yes taxes may be theft in one view, but under our current society, raising revenue for the common welfare is also a virtue, so we can't have have it both ways.
geysersam 43 days ago [-]
It's a funny argument the one about the family farm. In this case it's not even about inheritance tax. It's a sob story about a guy who couldn't inherit the farm because his dad owed the state money because they had let him not pay tax on his capital gains for a long time.
When should he have paid his capital gains tax? Had the farm changed hands back and forth?
_bin_ 43 days ago [-]
You can't just arbitrarily set the status quo that way, can't just sneak a premise that the state has default a right to collect a piece of arbitrary appreciation on an asset (as all assets are used for speculation) when the owner hasn't actually gotten cash from that, and that any government that doesn't tax that is just cutting someone a break on something rightfully owed. The state of nature is no tax, and as it's unpleasant, we create societies and fund them with taxes that we must deliberate and determine to be just and reasonable. You don't get to argue from the point that your preferred taxation regime is simply how things should be and that how things are is therefore wrong, especially not without a justification.
I'd also point out that people's assets have gone up in nominal terms in the past few years, but for many that's not reflective of an increase in purchasing power. Much of that increase is due to excess inflation from the profligate overspending of our past two administrations, so the cycle currently looks like this: government prints money and causes inflation -> your assets are "worth more" -> taxman says "give me a piece of that" even though your real wages have fallen or have just barely recovered to pre-2020 levels. And of course, even if we index to inflation, that will necessarily hit the poor harder: food and energy are deemed "too volatile" to include in headline CPI, but as necessities, they comprise a larger part of poor households' spending and so inflation will hit them harder than the numbers suggest.
CPLX 43 days ago [-]
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 use it to buy something from me, I have to pay taxes on it too. That's my income now.
If my father paid taxes on something he earned that's his tax bill. When I get it, I have to pay too. That's my income now.
This is very clear and consistent. Outside of all the people with an interest in pretending otherwise.
Also worth noting that there's no state interest whatsoever in preserving generational wealth. Just none. The fact that kids have to earn their own money instead of a family coasting for generations is a good thing for the most part.
There are some plausible arguments for preserving continuity in certain cases, like community based family owned businesses, farms, that kind of thing. But everybody already agrees with that which is why those kinds of things have been generally exempt from estate taxes for generations. The people telling you otherwise are trying to trick you into caring about their agenda, which is how to not pay taxes on their substantial wealth.
logifail 43 days ago [-]
> 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 person companies(!) - generally pay taxes on their profits, not their total income or revenue.
tsimionescu 43 days ago [-]
All companies almost everywhere absolutely pay taxes on revenue, in the form of sales tax / value-added tax.
logifail 42 days ago [-]
"VAT is...
- an indirect tax on the vast majority of goods and services
- borne by the final consumer, not by businesses
- charged as a percentage of the sales price and collected fractionally at every stage of production and distribution
- neutral, as the tax borne by the final consumer is the same regardless of the length of the supply chain"
VAT (and sales taxes) are absolutely paid by the company, not by the consumer. I as a consumer don't need to keep track of my purchases and pay VAT on them at the end of the month or year. Companies instead keep track of their sales and need to pay the associated VAT to the state every month.
And the final consumer of a good can also be a business, in which case VAT is still paid for that good. For example, if you buy a company car for use by your employees, you can't get back the VAT on that purchase (only if you buy a car to sell it on to someone else can you get the VAT back).
And, of course, given that consumers make purchase decisions based on the nominal price of a good, which includes the VAT, the market price of a good will depend on VAT as well. If an increase in VAT risks to push the price so high that demand decreases, companies can choose to reduce the price before tax so that the final price is low enough not to affect demand.
So, again, VAT is essentially a tax on all sales revenue a company makes. It's true that it doesn't apply to other sources of revenue.
logifail 41 days ago [-]
> VAT (and sales taxes) are absolutely paid by the company, not by the consumer [...] companies instead keep track of their sales and need to pay the associated VAT to the state every month
Businesses collect it on sales to their consumers (output VAT) and offset any VAT they've paid to their suppliers (input VAT) and the balance is paid to the state.
As that taxation-customs.ec.europa.eu article states: "VAT is borne by the final consumer, not by businesses."
(Source: I've been personally registered for VAT, I've worked for companies who were registered for VAT, I've had customers who were registered for VAT).
CPLX 43 days ago [-]
> 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.
Wytwwww 43 days ago [-]
> The state of nature is no tax, and as it's unpleasant
Being able to accumulate capital, at least without having to resort to extreme violence is also about as "unnatural" as it gets..
No taxes = No government = No excess (above subsistence level) accumulation of assets
entropicdrifter 43 days ago [-]
And the people who have a strong drive for the accumulation of capital/assets build armies and those armies shake down subsistence-living people for food and supplies in order to sustain themselves and suddenly you've got taxes again
Wytwwww 43 days ago [-]
Yes, thankfully modern liberal(ish) democracy(sort of) and the rule of law allowed us to exit this circle (well.. at least brought us much closer to that point than we ever were).
logifail 43 days ago [-]
> Being able to accumulate capital, at least without having to resort to extreme violence is also about as "unnatural" as it gets..
(This is a genuine clarifying question, because I'm struggling here) are you suggesting that saving is somehow unnatural?
AnimalMuppet 43 days ago [-]
I believe that the claim is this: In the long scope of history, being able to accumulate money without having to be strong enough to defend it is really rare.
Wytwwww 43 days ago [-]
> that saving is somehow unnatural
Depends on how you define saving. Hoarding perishable goods is of course a pretty natural behaviour but that only scales so much. Investment (i.e. owning more land or other productive assets than you can utilize directly yourself) seems pretty as opposed to communal ownership seems pretty "unnatural".
Not that I'm somehow implying that "natural" (whatever that really means, since using violence and coercion certainly seems like natural human behaviour) is somehow always superior to the opposite.
43 days ago [-]
jancsika 43 days ago [-]
> You can't just arbitrarily set the status quo that way, can't just sneak a premise that the state has default a right to collect a piece of arbitrary appreciation on an asset (as all assets are used for speculation) when the owner hasn't actually gotten cash from that, and that any government that doesn't tax that is just cutting someone a break on something rightfully owed.
That's a great point.
But note that you also cannot arbitrarily jump so far back in an implied chain of premises as if to suggest that you've somehow build your own (suspiciously libertarian-leaning) argument from first principles. For example:
> The state of nature is no tax
Well, the state of nature is also tribalistic. But imagine someone making an argument that collectivizing the farm in question is right because the state of nature is humans living in a collective.
You'd rightly reject such an appeal to nature in that case. Therefore, you should reject your own appeal above.
TheCoelacanth 43 days ago [-]
> The state of nature is no tax
The state of nature is no property. Billionaires can't exist without a government enforcing their property rights. Why shouldn't they pay the entity that made it possible for them to accumulate their vast wealth?
bluGill 43 days ago [-]
The state of nature is it is your property so long as you can protect it. There are lots of different ways to do that. Many animals have concepts of owned territory which they protect in various ways.
jncfhnb 43 days ago [-]
And you principally protect your property by… wait for it… paying taxes to the state to uphold law and order
mmcdermott 43 days ago [-]
While I'm sure that someone somewhere objects to paying for law and order, I think most tax grumbling comes from taxes rising (and, arguably, still not rising enough) to pay for bigger and bigger programs with an increasingly tenuous relationship to law or order. Not everyone objects to every line item, of course, but the bigger the budget gets the more certain it becomes that those rising taxes are not just to keep up with inflation on basic essentials.
arrosenberg 43 days ago [-]
> I think most tax grumbling comes from taxes rising (and, arguably, still not rising enough) to pay for bigger and bigger programs with an increasingly tenuous relationship to law or order.
The Constitution addresses this confusion in its' preamble. The role of the government includes law and maintaining order, but it extends further -
"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
AnthonyMouse 43 days ago [-]
A perfectly valid way of reading "promote the general welfare" is as a constraint on the government, i.e. it shouldn't do anything not consistent with that premise, not that it's empowered to do anything that is. The latter would be inconsistent with the overall architecture of the constitution as setting out a government of enumerated powers.
But the preamble to the constitution isn't legally binding anyway.
arrosenberg 42 days ago [-]
Even if you read it that way, it's not really a constraint. If I believe socialized healthcare improves the general welfare, then even your reading implies that it's something the government should be allowed to do. Maybe you don't think that should be it's overriding purpose, but I don't see how it constrains. If they wanted to be more specific, they could have been.
> But the preamble to the constitution isn't legally binding anyway.
No one said it was, but the intent of the framers, at least, is very clear - the government should do things that promote the general welfare, not merely establishing rule of law and enforcing civil order.
AnthonyMouse 41 days ago [-]
> If I believe socialized healthcare improves the general welfare, then even your reading implies that it's something the government should be allowed to do.
It implies that it isn't something the government would be separately prohibited from doing, if they were otherwise allowed to do it.
Consider how the First Amendment works. The constitution explicitly gives Congress the power "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries". But if they tried to pass a law saying that you couldn't quote a politician to demonstrate that politician's hypocrisy or mendacity as a violation of the politician's copyright in their own words, that law would be unconstitutional as a violation of the First Amendment.
A binding requirement for the government to "promote the general welfare" should likewise e.g. prohibit the government from issuing no-bid contracts to politicians' cronies for the operation of Post Offices, even though the government is explicitly authorized to operate Post Offices, because corruption doesn't promote the general welfare.
If you wanted the government to have the power to operate a healthcare system then you should have to amend the constitution to grant that power to Congress, since they didn't have it originally. Or have your socialized healthcare system(s) operated by the states.
jncfhnb 43 days ago [-]
Yes that is the nature of compromise
mmcdermott 42 days ago [-]
Agreed, but the post above draws a direct line between a taxes and basic law and order, but one could support scaling back any number of taxes and spending programs without opposing or endangering law and order.
jncfhnb 41 days ago [-]
You don’t get the law and order unless the government is able to derive power from an accepting populace.
bluGill 43 days ago [-]
That is not the state of nature though. There are "primitive" societies that don't organize their village that way. Social pressures and you working alone are enough to protect your property when the total population to worry about is around 100 people.
We use taxes because nature doesn't scale to towns of 1000, much less nations of millions. But that is not the state of nature.
Wytwwww 43 days ago [-]
The concept of property (the way we understand it i.e. all the stuff besides of a handful of personal items) is not something that generally exists or existed in "primitive" societies.
i.e. you can't really "own" more land than you and your family can personally farm and extract rent on it without a state to protect your claim.
TheCoelacanth 43 days ago [-]
And even much later under feudalism, property as we know it didn't really exist. Land (essentially the only productive asset that existed) was owned by the government, but the government was a loose network of aristocrats instead of a faceless state.
fluoridation 43 days ago [-]
You can if you can convince others to protect it for you.
43 days ago [-]
lazide 43 days ago [-]
Eh, the oldest form of government is a Kingdom.
If a government won’t enforce others rights to property, eventually someone is going to form a government where everyone’s things are theirs eh? Since what other option do they have if they want to own something.
jacobolus 43 days ago [-]
That's fine. Such people can renounce their citizenship and pay the required exit tax, convert all their assets to gold bars or whatever, and go move somewhere in the world without a functioning state, where they can hire a private militia, build their own basic infrastructure, etc.
lazide 43 days ago [-]
why would they do that when they can take over the gov’t and steal everyone else’s stuff? (see Russia, Venezula, China, and many others)
Notably, the biggest thefts seem to happen when they can convince people that the gov’t is doing it for ‘the good of the people’, and they’re ‘going after the rich people’, and then they can pocket it when no one is looking.
jacobolus 42 days ago [-]
In the USA it's mostly "the rich people" and extremely profitable corporations who have captured parts of the government and figured out ways to corruptly siphon money out of the rest of the economy into their own pockets.
This is a reason why we need better anti-corruption legislation, an end of the "super PAC", much higher inheritance taxes with fewer loopholes, and structural reforms to fix a profoundly corrupt Supreme Court.
lazide 42 days ago [-]
Sure, but that isn’t what the comment I was replying to was saying, was it?
Also, a lot of what you’re describing seems like regulatory capture.
NoMoreNicksLeft 43 days ago [-]
Given that most billionaires have their billions as imaginary ownership of gigantic corporations, how exactly would someone steal their shares from them such that government needs to enforce their property rights? Can I just walk up to the bank and say "hey, I have $100 billion worth of Facebook stock, gibs me da money"? You know, but for the feds swooping in (or possibly the Delaware state troopers) and shutting that down?
The government may indeed enforce property rights in a meaningful way, but it doesn't seem like it's doing this for billionaires.
> Why shouldn't they pay the entity that made it possible for them to accumulate their vast wealth?
If this were indeed a true description of how that process occurs, why are you so comfortable with letting the government "make that possible"? Where in the Constitution (or even common law) does it grant the government this power?
Wytwwww 43 days ago [-]
> Can I just walk up to the bank and say "hey, I have $100 billion worth of Facebook stock, gibs me da money"?
No, but assuming you are on Facebook's board / in upper management you can conspire with the rest of the board to get rid of Zuckerberg (possibly permanently) and share the company amongst yourself.
ARM China seems like somewhat close example of what can happen when there is no government willing to protect property rights. e.g. as long as he has enough local support a CEO of your subsidiary could just take over the entity and there would be nothing you can do about it.
IMHO we'd end up with some dystopian form of Cyberpunk style techno feudalism without strong governments regulating everything. Which in theory might be a good thing for the corporations themselves, just not for most of the people who are currently running them.
NoMoreNicksLeft 43 days ago [-]
> No, but assuming you are on Facebook's board / in upper management you can conspire with the rest of the board to get rid of Zuckerberg (possibly permanently) and share the company amongst yourself.
Yes, if you want to oust him and take over as CEO, then boards of directors have that power. But that's more about his job security. When he leaves, he leaves with just as much stock as he ever had, and in the case of some termination clauses in contracts for that stuff, he walks away with more than he walked in with.
With the government out of the picture, this doesn't much change. If the board of directors tries to confiscate shares or some equivalent (I dunno, withholding dividends? Does Facebook even pay dividends?), then their stock price tanks immediately. Somewhere down near $0. Their financing falls apart shortly after that, and pretty soon the company goes under. The punishment for some group stealing Facebook isn't government goons stepping in and bashing skulls, it's in the complicated structures that make it worthless just about as soon as it's stolen.
I think your Chinese example is quite the opposite of this. The government of China basically has to step in and allow ARM China to pull such a stunt, or it's impossible.
Wytwwww 43 days ago [-]
> Somewhere down near $0.
> complicated structures
I guess. But I just don't see how could the stock market (in its current form) or most of those complicated structures exist without governments. Of course it's a silly discussion since Facebook in its current form (including corporate and ownership structure) wouldn't be a thing without all of that.
> in the complicated structures that make it worthless just about as soon as it's stolen.
Facebook is still highly profitable, arguably without any government regulation it could be even more profitable. Why share any of that value with the shareholders who can't really sue you or do anything else? Sure if you did that nobody would trust you if you started a new company and were looking for investors (which is why Facebook wouldn't exist in the first place in a system that allows that) but that doesn't really matter if the government suddenly disappeared.
Not saying that Facebook's upper management would immediately try pulling off something like that it's just seems like the natural long-term outcome. Political/social instability is usually already priced in, so FBs valuation would collapse just because something like that became an option regardless of Meta's/FB's intentions. At that point the cost of "confiscating" shares or similar shenanigans wouldn't really be that high since being in direct control of the company would be worth a whole lot more than owning some theoretical share of it.
> allow ARM China to pull such a stunt, or it's impossible.
Why? What could ARM/Softbank do if their Chinese subsidiary decided to just ignore them while continuing to use their IP. Of course their whole business model couldn't exist in the first without any way to enforce contracts since the companies actually manufacturing the chips would just steal that IP themselves.
ForHackernews 43 days ago [-]
> ...most billionaires have their billions as imaginary ownership of gigantic corporations
Exactly. The entire notion of their wealth is predicated on an elaborate system of law and governance! Otherwise, it's all just freaking numbers on a computer.
nemothekid 43 days ago [-]
>Given that most billionaires have their billions as imaginary ownership of gigantic corporations, how exactly would someone steal their shares from them such that government needs to enforce their property rights?
You have it backwards. "imaginary ownership of gigantic corporations" doesn't exist without government. The government doesn't "protect" Zuckerbergs shares, the government is the vehicle that gives Zuckerbergs shares value. Without the government Zuckerberg's billions is worthless.
In this fairytale world where Zuckerberg is somehow made a persona non grata, then all his shares would become worthless as he wouldn't be able to sell them, nor would he be able to enforce Facebook (the entity) to do anything on his behalf.
tsimionescu 43 days ago [-]
Imagine the government went away tomorrow. Would Mark Zuckerberg's employees keep giving him any kind of money for the work they are doing? Would they even give Facebook money, or would they just emit invoices with their own bank accounts as the destination?
Billionaires absolutely depend on a very robust system of laws to maintain control of the giant corporations that they own. Zuckerberg couldn't even enter a Facebook building if his employees rebelled against him and the law wasn't protecting him.
Note, I'm not trying to single out Zuck in any way, just wanted to pick some billionaire tied to a well known corporation to make the examples simpler.
FactKnower69 43 days ago [-]
>You can't just arbitrarily set the status quo that way,
huh, what natural, physical laws are being broken? collecting taxes exceeds the speed of light or goes below 0K or something?
Log_out_ 43 days ago [-]
yes, we can. the whole premise of a democracy is that every law is a solid majority away from being turned over.one of the reasons big money is inherent anti-democratic.
_bin_ 43 days ago [-]
Okay, I don't actually believe in that form of democracy. Not all things that are legal are good, therefore we should set constraints on what the majority can do. I'd describe your system as closer to mob rule. And no, that is not the premise of every system that incorporates democracy as an element, it's the premise of an absolute democracy.
jjav 43 days ago [-]
> therefore we should set constraints on what the majority can do
Which inevitably leads to the question: who should get the power to do that and why they, specifically?
pdonis 43 days ago [-]
You have it backwards. The actual question is, how did the majority magically get the power to enforce its will on the minority in the first place?
chairmansteve 43 days ago [-]
Maybe the question is, how are the wealthy magically protected from the mob?
The answer is, some form of government protects them. And that form of government is going to want it's tribute.
jjav 43 days ago [-]
> You have it backwards. The actual question is, how did the majority magically get the power to enforce its will on the minority in the first place?
This doesn't answer my question at all.
Who should decide those limits, and why they? Who pics them?
Think of a thought experiment: A new city/town/state/country is getting started (let's assume peacefully somehow, this is a thought experiment).
Who gets to set those limits on democratic action?
One choice that comes to mind is everyone gets together and pics the wisest person in the crowd = representative democracy.
Another choice is the strongest bully in the group beats everyone up and sets the laws however he likes = dictatorship.
What other choices? And which one should be best?
pdonis 43 days ago [-]
> This doesn't answer my question at all.
I wasn't trying to answer your question. I was pointing out that your question presupposes that the majority has the power to enforce its will on the minority. It doesn't even consider the possibility that the majority having that power is not a law of physics, it's a social construct, and a society does not have to adopt it.
> A new city/town/state/country is getting started (let's assume peacefully somehow, this is a thought experiment).
Who gets to set those limits on democratic action?
Again, you're assuming that what gets started is a city/town/state/country as a political entity, with the ability to enforce its will on its residents, and then asking how that power gets regulated.
You're not even considering the possibility of a community getting started without anyone having the power to enforce their will on others, with everyone having to deal with everyone else as an equal, and nobody having any "governmental" powers.
Historically, such things have happened. For example, saga period Iceland went for several centuries without anyone having governmental powers. Some of the American colonies in the late 1600s and early 1700s--Pennsylvania is a good example--had effectively no one having governmental powers, since while there was nominally a "goverment", it had no ability to enforce its will on residents. These are "other choices" that your question doesn't even comprehend.
What happened in those cases? Historically, those societies did fine as long as they were left alone. What eventually ended them was outside interference. Saga period Iceland ended up conquered by Norway. Pennsylvania ended up having its regime tightened up by the British after the French and Indian War (as part of a general tightening up on all the American colonies).
kjkjadksj 43 days ago [-]
The majority held this power as long as we’ve been a social species. Even a Pharaoh lives with consent of the majority even if they’ve convinced that majority they are divine.
43 days ago [-]
tsimionescu 43 days ago [-]
There is no mystery here. The majority has the physical power to force the minority to do what they want (at least if the difference is big enough). This is an objective, measurable power, not some theoretical concept or moral right. It's not magical, it very much comes from physical laws, like fists and clubs.
MisterBastahrd 43 days ago [-]
Violent revolution, mostly.
keybored 43 days ago [-]
Of course no one is surprised.
> therefore we should set constraints on what the majority can do.
The constraints are supposed to be a constitution and time. In time, as people die and new people are born, the world changes. New people are in charge. They can even rewrite the constitution.
What other alternative is there?
> I'd describe your system as closer to mob rule.
“Mob rule” is just the pejorative anti-democrats use for democracy not going their way.
What’s a rule-by-rich-people pejorative? Pig-rule? Just a pejorative. Just as meaningless.
Anti-democrats don’t have rational arguments on their side. Therefore they have to invent specters of the pitch-forked mob who is killing babies in the streets, the desperate, unwashed…
But all of that begs the question: if the “mob” rules, why are they in the streets? With pitch forks? Desperate? Of course it is completely irrational. If the “mob” already ruled there would be be no mob because the average person would enjoy dignity and respect. Safety and security.
They would have enough means to appear upstanding. Like you know, those rich people who rule now or ruled in the past. Those who never had to excuse themselves for being part of a mob or being unclean.
But it’s clear that if you want people to be desperate and in the dirt then you also don’t want them to rule. That’s how you get a mob.
FactKnower69 43 days ago [-]
>I'd describe your system as closer to mob rule.
lmfao this is always, always, always the refrain
freejazz 43 days ago [-]
Really? We're a 'solid majority' away from murder being made legal?
witchammer 43 days ago [-]
> 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.
gperkins978 43 days ago [-]
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% capital gains tax has problems. The estate tax only applies to this who are very, very fortunate. These are not even earned. Again, if one hates his country, he can move to Dubai, Bermuda or the Glorious Sultanate of Brunei and enjoy their lifestyle.
I do understand that people in California get angry because the state is so poorly run, but most of the US has easily avoided the self-created problems of California and New York city.
supplied_demand 43 days ago [-]
==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.
Nasrudith 42 days ago [-]
Fair enough that they are outsized productivity but they are also two places which have managed to basically population-cap themselves, primarily through real-estate mismanagement and refusal to build sufficiently to make it worth living there even as infamously high paying areas.
43 days ago [-]
_bin_ 43 days ago [-]
Not really. Trace the course of history and the natural state of man is much closer to what Hobbes described. In the wild, homo sapiens doesn't have a taxation system. As we built up civilizations, we created taxes as I described. And neither am I arguing for my preference to stick with how we mostly run our taxation regime (tax value when moved, not value at rest) without some justification for it.
consp 43 days ago [-]
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.
mbrumlow 43 days ago [-]
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.
supplied_demand 42 days ago [-]
==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.
wr3nothopter 43 days ago [-]
[dead]
mensetmanusman 41 days ago [-]
Yes, let’s implement this so that all farms are owned by large corporations.
MisterBastahrd 43 days ago [-]
Not even sure why I should be upset in the first place. If I get fired from my job, nobody is going to run to my aid crying that I deserved that job because my daddy worked really hard to put me through school (he didn't, but that's besides the point) and he wanted me to have it. No, I just get fired. How is a family farm any different? It's just an asset. Birthrights shouldn't exist past citizenship.
lazide 43 days ago [-]
Because the idea of leaving something to your kids (and a legacy beyond oneself) is a fundamental motivator for most people?
SR2Z 43 days ago [-]
Boo. That's not what's at stake here; people don't wanna pay taxes that are fairly owed to the government.
_bin_ 39 days ago [-]
> fairly owed
You're doing it again. You're assuming that it must be a just tax. You're assuming that a tax is somehow intrinsically "owed", that any tax requires no justification.
lazide 43 days ago [-]
Literally the comment I am replying to is about making it so no one can pass on property to their kids.
Slava_Propanei 43 days ago [-]
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.
MisterBastahrd 43 days ago [-]
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.
_bin_ 39 days ago [-]
Wrong, we literally double everything in our tax code so that spouses can file jointly.
lazide 42 days ago [-]
This is the ‘fuck anyone trying to pass anything to their children’ element which most parents will (rightly) got WTF at.
SR2Z 42 days ago [-]
The exemption is several million dollars.
I don't mind if people get mad when anything more than that is taxed.
lazide 41 days ago [-]
That is not what the prior comment I was addressing said. Maybe implied, but that’s different.
MisterBastahrd 42 days ago [-]
Yeah, I'm sure the 1% of people this actually affects will be really big mad and stuff.
MisterBastahrd 43 days ago [-]
You can make that claim, but the fact of the matter is that the US is a representative democracy, and our elected representatives make the laws. We are free to choose other people for the job if we want different laws. The vast majority of people were not lucky enough to be in a situation where their bumpkin ancestors just happened to possess a large swath of land, and so we don't vote to protect large swaths of inherited land.
They owe taxes? They can pay them. They can afford to pay them because they have inherited assets. "Oh no, they're gonna get a diminished inheritance. What a disaster." I'm not getting one, and neither are most of the people in the country. They'll still have their inheritance, they just won't have the land. And they aren't entitled to it if they don't have the money to pay their taxes.
_bin_ 39 days ago [-]
I've watched chunks of beautiful Texas ranchland get sold off and built up by insufferable austinites for the marginal mcmansion. I will probably oppose a policy that encourages that and would rather the descendant of your so-called "bumpkin" keeps it.
svara 43 days ago [-]
> The obvious fix is to not step up basis on death.
And that's how it's done in many parts of the world, works perfectly fine. There's really no reason to step up basis except to provide that loophole, which is probably exactly the reason it's done.
tim333 43 days ago [-]
I'm not sure that's a very good fix because the data of how much was paid for the assets may not be available after their owner is dead. The system in the UK seems to work ok for the most part. No CGT on death (the equivalent of step up basis in the US) but 40% inheritance tax on most of the assets over £325K.
We do have the odd exemptions like Clarkson's Farm which was bought partly for inheritance tax avoidance, but you don't have to do that.
eli 43 days ago [-]
What would the owner have done if they decided to sell the assets shortly before death? Either they can establish a cost basis, or the basis is assumed to be $0. I don't see why this is a big problem.
tim333 42 days ago [-]
It's enough of a hassle acting as an executor when your parents die without that on top.
_bin_ 43 days ago [-]
There's also no fundamental reason for the state to institute any form of estate tax; on the contrary, I specified it goes against our usual federal regime of taxing value as it's moved rather than value at rest. If anything, I'd question why you believe there's some inherent reason or right to have any form of estate tax, let alone to the point one forces liquidation of assets. One form of taxation can be more or less just than another and it's much easier to make the moral case for using force to collect a portion of value moved through government infrastructure (banking system, roads, ports, etc.) than something that remains unsold.
I didn't say taxation is theft and would rather you didn't put words in my mouth. You're assuming I'm against any form of taxation whatsoever on a moral basis, which isn't actually true. I think there are values reasons (most of us actually like the idea of a family business staying in a family, not getting sold to private equity) and moral reasons why we should continue resetting the tax basis of inherited assets. As a compromise position, I think it would be more reasonable for you to suggest removing the stepped-up basis but not counting inheritance as a taxable event.
pintxo 43 days ago [-]
I don’t get you intro argument. An estate tax is like the poster child of value moved: from the parents to the children. In contrast to a wealth tax.
mbrumlow 43 days ago [-]
I can see the reasoning. But the value did not really move. As the estate is family owned. The family did not die, a member of it did.
dwater 43 days ago [-]
Seems like splitting hairs to me. If the estate is put into an LLC or similar then the death of a member doesn't involve movement of money. If the estate is owned by an individual and then inherited by their beneficiary then money moved from the deceased to the living. The Family is not a legal unit; the beneficiary doesn't have direct benefit of ownership while the owner of the estate lives.
tsimionescu 43 days ago [-]
By this logic, if I sell you a car, no money moved, because both the car and the money are still owned by the both of us. Or at least, if you're brother takes your car, you can't ask the state to give it back to you, as the car didn't really move, it's still in the family.
A family is not a single entity under any law in any country I know of. Certainly not in the USA or anywhere in Europe.
mbrumlow 40 days ago [-]
Are you going to drive me to work everyday after the transaction?
The difference is the kids have been spending estate money and have access to all the assets the estate controls. It make no sense that would change because a member of the family died.
geysersam 43 days ago [-]
> The counterpoint is that this leaves money invested, which means others invest in other things,
This is a bad argument. Taxes are also money invested, in schooling, infrastructure, etc.
It's a very common fallacy of people criticizing public spending to point to the stock market and say "Look! Imagine how rich we would be if we had just invested the public spending instead." Completely falling into the trap of discarding the value growth of public investments just because they are not measured and advertised the same way.
ghodith 42 days ago [-]
Both arguments are bad, in that they are both based on the best use of money that isn't yours to use.
Saying "this person's money most benefits me if I let them keep it" vs "this person's money most benefits me if it's redistributed to me" are just two frames that reveal your belief in your entitlement to others property and labor based on your belief of it's benefit to you.
sologoub 43 days ago [-]
> Taxes are also money invested, in schooling, infrastructure, etc.
Even that spending is not effective. Drive California roads and you’ll often see fixes that aren’t much better than the damaged roads they replaced. And let’s not talk about our wonderful train projects…
In theory, this money would make a lot of difference. In practice, it’s heartbreaking.
bruce511 43 days ago [-]
Most tax dollars go to social security, health (including medicare) interest and defence.
So on the one hand, very little of that is infrastructure. Mostly it seems to go on "keeping people alive".
Now sure, the govt could invest the money instead, and let a bunch of (mostly old) people die.
In our "money" equation, old people have little practical value (and there's no line in our fiscal analysis for measuring our humanity).
Which perhaps is why it's best not to evaluate returns on govt spending the way you would measure returns on personal investments.
[As a PS I'd add that all those taxes, flowing back to the old people, is flowing back into the economy, which is what keeps businesses in business, and keeps those share prices going up.]
_bin_ 43 days ago [-]
Nevertheless, welfare for olds is in no way an investment when those same individuals have reached the end of their productive years and have a decade or two to live. The point was that calling taxes "an investment" is largely untrue when most tax dollars don't go to anything of the sort.
Social security and medicare are not means-tested in any way whatsoever. In fact, they are massive welfare programs that make our budget structurally unsustainable to give money to the demographic that has had the most time to build up wealth and assets. Around one-third of all US wealth is held by Americans over seventy years old. Perhaps instead of an estate tax, we should explore having those well-off seniors use their savings and home equity instead of demanding government funds. Not to mention decades of subsidizing housing demand has drastically inflated housing prices, and younger Americans are now paying many of these retirees several times what those properties went for decades ago, an increase well in excess of inflation. In other words, through multiple channels, the young are being sucked dry by the old, despite the fact that the old hold a huge chunk of wealth.
I'd also point out old people are a terrible way to feed money back into the economy. They are generally the last people to adopt any innovation outside medicine, so increasing their share of spending draws dollars away from new innovation and towards constructing bingo halls. That has a caustic effect on our long-term economic outlook.
There will of course be the poor grandmother whom we don't want eating dog food. I doubt anyone disagrees with you on that. Let's just not pretend all of them need the checks they presently receive.
oyashirochama 43 days ago [-]
Social security, specifically is a mostly or was mostly a way to force retirement preparation on the masses who decided they didn't want or know how to before this. Most wealth is now held by middle aged people in the US actually, housing issues isn't even caused by old people but by multinational banking/holding corporations like BlackRock and its like.
geysersam 43 days ago [-]
It's invested. In infrastructure, schooling, endless wars on foreign soil, etc. You not agreeing with the quality of the investment is a separate issue. You probably don't agree with every investment in the private sector either.
sologoub 42 days ago [-]
Infra in CA is not going so well. Roads as an example are terrible compared to most developed countries. When last years winter storms damaged many roads, the newly paved replacements are not very smooth at all and some have been redone multiple times in the span of a single year. I don’t know what the causes are, but when comparing to EU where they have to account for freezing temps, CA doesn’t seem THAT complicated. Yet EU highways on average are a lot better.
gperkins978 43 days ago [-]
What are you doing to change this? Are you trying to make the situation better? California has been run into the ground for the last thirty years intentionally. Many residents love having mentally ill people die in the streets. They have created an entire system to support this. Money has been drained away from roads and schools to pay for ever growing "programs" to employ rich white ladies so they can brag to their friends about their incredible virtue.
You are free to leave. There are plenty of low-tax countries. If you want to live in the US, Europe, Japan,..., then you must pay to be part of our reindeer games.
That said, PLEASE get involved and try to direct public funding and attention towards core activities (roads, schools, infrastructure) instead of ever more ridiculous programs to employ Berkeley graduates in virtuous-looking jobs. Utah does a great job at this sort of thing. Instead of learning from them, our political elite degrade them and insult them for their religious beliefs. I once repeated a colleague's obscene jokes, only I stated that he said them about Muslims instead of Mormons. He lost his mind trying to correct me. It was amusing.
sologoub 42 days ago [-]
From your reply you haven’t actually lived in either Europe or Japan. They generally do not have people die on the streets and you enjoy some excellent infrastructure. It would be nothing short of amazing to get half the services or protections people in other developed countries take for granted.
cperciva 43 days ago [-]
This is something people love to rage about, yet it's not one with an obvious fix.
In Canada, assets are deemed to have been disposed of upon death (or gifting) so the estate pays capital gains taxes on the accrued profit. There are a few exemptions for political reasons, e.g. to allow farmers to pass appreciated farm property to their children tax free, but they're sufficiently limited that they don't cost very much.
Seems like an obvious fix to me -- when the cost basis is stepped up, taxes are due -- and in practice it seems to work pretty well.
_bin_ 43 days ago [-]
Family farms are a good example but there are still plenty of others like a family business. I wouldn't care to see an increasing fraction of assets fall into institutional ownership simply because people are taxed out of owning them intergenerationally. There's a massive difference between "the government will tax you for part of your value" and "the government will, over a sufficient time, tax you entirely out of even a growing asset."
If the concern is how much the policy costs the nation, then I don't think that's a sufficient reason to change things either. The top 1% in America hold about 31% of a total $140 trillion, or $43 trillion. This is, in a very optimistic case, around twenty years worth of the current federal deficit. Given the trajectory it's taken over my entire lifetime I find it unlikely it would last more than a decade. If the concern is cost, we have a "money out" problem in the US, not a "money in" one, largely driven by our ballooning mandatory spending (much of which goes to a radically outsized group of old people, whose entitlements neither party will touch despite their outsized ownership of wealth) and the high interest expense that's caused. Even if we outright confiscated every dollar of the 1%'s net worth, that wouldn't represent a remotely sustainable solution. Hence my comment about most of these policies looking more like schadenfreude than a sincere desire to fix things.
43 days ago [-]
kelseyfrog 43 days ago [-]
Help me understand why a family farm would have such an issue if the owner-operator dies, but Walmart didn't when Sam Walton died? Is it an issue of incorporation/business structure?
cperciva 43 days ago [-]
Leaving aside the fact that Sam Walton was an American and so his assets had no "deemed disposition" upon his death: Walmart is a publicly traded company, so if his heirs inherited a few % less of the company it wouldn't make a big difference.
In the "family farm" (and "family business") scenario, we're talking about private companies -- whether incorporated or not, all the owners are related. If part of such a company needs to be sold off to pay taxes, it would presumably be sold to a someone at arm's length, which would fundamentally change the business structure -- just like running a startup with VC investors is different from running a bootstrapped startup.
kelseyfrog 43 days ago [-]
Couldn't family farms plan around such an event occurring, either by having the cash on hand to pay taxes or through some sort of insurance?
bluGill 43 days ago [-]
Where does that cash come from? Family farms often are worth millions on paper, but it is all land. There typically isn't that cash. And the way tax laws and inflation works you are discouraged to not keep that kind of cash on hand - there is no place to save it that keeps pace with inflation after taxes that is low risk (If everyone tried this you will hear horror stories about someone who puts the money aside and then the parents die so it is needed but the market is down and so they lost money)
kelseyfrog 43 days ago [-]
Thank you. I feel like I understand the structure better now
43 days ago [-]
NoMoreNicksLeft 43 days ago [-]
In the particular example of a "family farm" (mostly extinct since the 1970s in any meaningful way), profit margins were always slim. Furthermore, life insurance for grandpa isn't likely to cover the difference... the real estate value of smallholdings is positively astronomical in many cases (acreage alone does this, but it's often high quality land in many ways).
There's not many plausible routes to "paying the millions-dollar death tax so that developers don't turn the cornfield into a suburb" in such scenarios. Mostly moot though, this all played out and was over before most of us were born. I suppose there are gigantic 20,000 operations that "won't stay in the family"... but those farmers:
1. Aren't really living on the same piece of land that they farm
2. Having to sell off 1500 acres to pay the tax bill doesn't much affect their operation except that it's slightly smaller
3. Have someone custom combine it anyway... they're basically a management company that hires a bunch of contractors
4. Generally are incorporated in such a way that sole ownership hasn't been an issue since great-great-granpa died back in 1961
Family farms are, at this point, largely mythological.
asne11 43 days ago [-]
Suppose you're a young 20 something with maybe $300 to your name. Daddy gets struck by farming equipment and dies. Now you have two choices:
1. Continue operations of the family farm, assuming you can come up with the money to cover taxes.
2. Sell the farm to Big Farm, Inc., get a $5M check and forget about it, regardless of the consequences that means to your customers.
consp 43 days ago [-]
The taxes are less than buying the farm outright so it would just be a very cheap buyout. I do not see the problem, you can get finance for that in civilized nations. It's not easy but neither is buying a farm normally.
Inheritance, even with normal tax, is a cheap way of keeping money in the family and keeping rich people rich. It is not based on merit, capabilities or need and serves no purpose in a society based on improving the lives of the entire population. (Which you can argue is not what [country with low inheritance tax] is)
cperciva 43 days ago [-]
[inheritance] serves no purpose in a society based on improving the lives of the entire population
I would say that society is served well by the ability of widows to inherit and not be left destitute. Similarly for minor children.
If you're talking specifically about inheritance by adult children, I agree the arguments in favour are weaker.
kelseyfrog 43 days ago [-]
Is there no system which can provide for widows and minor children yet isn't able to be taken advantage of by the hyperwealthy?
bigfatkitten 36 days ago [-]
> The taxes are less than buying the farm outright so it would just be a very cheap buyout.
If you have $300 to your name, you're not getting finance. The bank will just laugh you out the door.
brnt 43 days ago [-]
Here in the Netherlands the (once setup as) farmers coop bank is notorious for not doing that, they heavily favour bigco and business models that capture subsidies effectively (which usually means scaling one part to ridiculous proportions).
eastbound 43 days ago [-]
So you create a startup.
- The first year it has 10k€ ARR.
- So it is worth 100k€. You must my pay 30k€ in capital gains taxes.
Like this, every year? Every time it has more revenue, it multiplies its future worth, therefore multiplies it FMV, therefore you must pay the CG on the multiple of your income?
cperciva 43 days ago [-]
Only if there is a "deemed disposition". Which in most cases happens when the owner dies.
You probably don't need to worry about this happening multiple times.
lowkey 43 days ago [-]
Amd this is why there are no mid-sized family businesses remaining in Canada, except for the occasional farm. Billionaire oligopolies are all that remain as only they are sustainable in the tax farm once known as the great white north.
bdndndndbve 43 days ago [-]
Billionaire oligopolies are everywhere, this isn't a uniquely Canadian problem. TFA points out we live in an era of Gilded Age inequality.
lowkey 41 days ago [-]
I come from a province that is wholly owned by a billionaire family. They own all industry, all media, and basically every (barely) living wage job outside the government. Look up the Irving family.
Billionaires may not be a uniquely Canadian problem, but the lack of a wealthy middle of entrepreneurs and reasonably wealthy individuals is uniquely Canadian.
Canadians cheer at taxing the rich and as a result end up with a “middle-class” that is barely getting by, a billionaire class that rules the Kingdom, and nothing in between.
Canada is designed to support Oligopolies. It does so in the media, food distribution, telecom, insurance, banking and virtually every industry in the country. This is an intentional policy decision of punishing entrepreneurs and pushing us out of the country. Look at the recent wealth taxes and the national response to them as an example.
doctorpangloss 43 days ago [-]
> The counterpoint is that this leaves money invested, which means others invest in other thing.s.. This means less money for R&D, for expansion, for your employees...
When grandma's Fidelity manager takes 2% every year to buy overpriced mutual funds that themselves eventually just buy SPY, how many dollars do you think goes to capital raises of any kind? The top of the S&P, which essentially determine its returns, are doing stock buybacks with their cash.
You would have been more persuasive if you had said, "Taking cash out of the stock market and into real assets results in inflation, which is bad for everyone, because nobody needs Apple stock to live, but they would like houses."
opo 43 days ago [-]
>This is something people love to rage about ...
Yes, people get angry about this, but no one has provided any statistics showing this is actually a common loophole.
The basic idea in the reddit post is that there were lenders giving multi-decade loans at a tiny interest rate (only payable upon death with also sharing a % share of the gains).
Maybe there are lenders who have lots of capital and also don't understand the time value of money, but no one has actually provided the names of these lenders, etc.
According to this: https://finance.yahoo.com/news/jeff-bezos-sell-5-billion-185.... Bezos has sold around $13.4 billion in stock in 2024. If he could easily avoid millions (maybe billions) of dollars of capital gains tax by this one simple trick, why didn't he?
_bin_ 43 days ago [-]
I'm very much on your side of the argument but it's common practice. It's not like you can walk into a bank tomorrow and ask for that sort of thing, but for a HNW customer who makes use of lots of private banking services it's routine.
I'm not Bezos or part of his family office so I can't say for sure. My guess would be a mixture of capital demands elsewhere (Blue Origin?) and a desire to diversify. Start-up founders necessarily keep all their eggs in one basket; people building a multi-generational fortune don't.
Rebelgecko 43 days ago [-]
Is it still that common? I'm not super duper high net worth so maybe I'm missing out on the good deals, but my bank offers these loans interest of SOFR+2-4% depending on your net worth. When the SOFR rate is <1% like during COVID, it's a pretty good deal. When the SOFR rate is more like 5% (which I think is more typical?), it's not such a good deal.
opo 43 days ago [-]
>When the SOFR rate is <1% like during COVID, it's a pretty good deal.
It is very common to make loans based on using stocks, etc. as collateral. But that isn't what people claim happens with the "buy, borrow, die" loophole. The claim is that these loans have incredibly low interest rates (much lower somehow than the IRS Applicable Federal Rate) and the interest is only payable upon death - which might be decades away. That is how the borrower can supposedly avoid capital gains taxes.
Maybe there are rich lenders who don't understand the time value of money, but doing a quick search, I have not found one stat on how many lifetime loans like this are actually being done.
toast0 43 days ago [-]
I don't know that I've seen a lot of details, but I didn't realize the rates were supposed to be less than benchmark rates. Either way, the expectation is that the appreciation of the capital exceeds the interest. (Not that anyone should rely on that expectation, but clearly, people do)
And that the lender is offering the loan to capture an ultra high net worth investor; so even if you lose money on the interest, you gain on advisory services and fees; plus first bite at holding the accounts of the heirs. Requiring good collateral and high account minimums make the risk for the lender low --- if broad market value drops significantly, the account should still have more collateral to pledge to get back to 1:1. Also, if market value drops significantly, selling shares becomes easier for the investor, as there may be some shares with capital losses, and paying down the loan becomes more attractive.
ryandrake 43 days ago [-]
> I don't know that I've seen a lot of details, but I didn't realize the rates were supposed to be less than benchmark rates.
I know someone who got a mortgage rate way, WAY below prevailing rates (like around 1%, gotten back when normies like us got rates around ~3%), because 1. he is a very high net worth individual and 2. he owns a business that does a lot of business with the bank. So, he gets extra special treatment because he's rich and the bank appreciates his business and expects the relationship to lead to even more business.
It's not a huge stretch to imagine that Jeff Bezos's bank would happily loan him money at some token 0.01% interest rate or some similar sweet deal.
monocasa 43 days ago [-]
It's not under AFR, it's just generally less than inflation.
And the loan terms aren't payable at death on any of the loans, they just let you refi every year when you want another $100M for that year's incidentals.
opo 42 days ago [-]
>...but it's common practice.
There are many web pages claiming this, but I haven't seen actual statistics on this loophole. To be clear, many, many, people borrow against the value of an asset - from the middle class up to the ultra wealthy and they can defer capital gains in that way. The claim with buy, borrow, die is that you can borrow for decades and not have to pay back the loan until death. Some claim that the rich just keep rolling over loans on to new loans to avoid paying interest/principal for decades. The reddit posting discussing this has been edited since it was first discussed on hacker news, but now it emphasizes that the bank and the ultra wealthy person come to some sort of agreement to share in the gains of the asset upon death. Considering the length of the agreement it seems it would difficult to come up with an agreement that would be fair to both sides in that agreement.
I saw that on reddit, /u/Taxing responded to a different post by the author of the reddit posting and was skeptical of how common this approach is:
>...I too went to law school, earned my LL.M. from NYU and have been practicing in this area for decades with broad family office clients ranging from a few hundred million to many billions, and yes have clients with public companies, private companies, and taken companies between the two structures. I’ve worked at every level and now sit on the boards, manage the relationships, etc., which I enjoy more.
>...I struggle to think of a single family office interested in a lifelong arrangement with Goldman or other firm at that level, providing them strings of participation and control. Over time, circumstances change, and they are not your friend.
So, maybe, the "Buy, Borrow, Die" approach is common practice, but I have yet to see any actual stats on it.
monocasa 43 days ago [-]
The banks don't like to dump multiple billions at once into these schemes. It's more about trickling hundreds of millions a year out to cover all possible living expenses, and a lot of that going into assets like houses and ships that can get repoed if shit hits the fan.
He wanted $13B liquid to start Blue Origin, a pretty speculative venture that might end up with nothing. And wanted to still outright own Blue Origin unlike Musk's Twitter buy that was highly leveraged by the Saudis.
grantwu 43 days ago [-]
> In exchange for such favorable terms (i.e., small carrying cost, matures on death), the bank will receive a share of the collateral’s appreciation (essentially amounting to “stock appreciation rights"), and this obligation will be settled upon the borrower’s death.
Getting a loan against assets is another way of "using" it, so why not make that a taxable event?
Just like now your stock value would not be taxed while it is invested. But now it would be taxed if you use it as collateral for anything. If you don't want to pay capital gains by selling the underlying stock then you can just get a bigger loan and pay the taxes out of that.
There, now you don't have to liquidate but the taxpayers benefit too when the wealth is "used" by the owner.
lesam 43 days ago [-]
This still leaves open ‘buy, don’t borrow, die’ as a way for the dynastically wealthy to opt out of paying capital gains tax.
I think the sensible option is making death a taxable event, rather than borrowing (with perhaps exceptions for the family farm, but not for the family billion dollar business).
And the second best solution is eliminating the step-up basis, which without deemed disposition at death is just a free gift of capital gains tax rebates to heirs of the most wealthy.
eli 43 days ago [-]
Or another way to think of it: your estate has to settle all outstanding tax bills after your death, including the gains in assets that have remained untaxes your whole life.
a_c_s 42 days ago [-]
Death already is a taxable event though?
nemothekid 43 days ago [-]
Only issue I can forsee is that every loan, except a credit card, personal loan, and student loan, is typically loaned against an asset. I guess you could make carve outs for mortgages and auto loans.
kemitche 43 days ago [-]
Why would there need to be a carve out for home/auto loans?
1. No one really borrows against the value of their (paid off) car.
2. Property taxes already, generally, are against the assessed value of the home, so it's already happening for that case. There are some minimal exceptions, like CA Prop 13, of course, but generally speaking, if I want to take out a second mortgage or something, my home's value is already appropriately "stepped up."
nemothekid 41 days ago [-]
I guess I'm not sure how this mechanism would work without being abused. I assumed when I take out a car loan, the bank is giving me money, in which the collateral is the car or home.
But I now assume the tax would be on the assessed change value of the asset, for which a new car or home would be 0, so no tax.
briffle 43 days ago [-]
There are literal mansions on dozens of acres (with landscaping, ponds, etc) 3 miles from me that have a lower property tax than my 2000sq foot suburban home. They were purchased by a trust in the 80s or early 90's, and now the kids (or grandkids) live in it. My state limits how much property tax can be raised on a home until its sold, and then that number resets.
It drives me a bit crazy..
Salgat 43 days ago [-]
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 gains on it). In the end you're only taxed $20M in capital gains every year on a billion dollar investment and after 10 years of this your remaining $800M is not taxed any further.
EDIT: Since it's not obvious, this would apply to the very rich, not to someone running a family farm. There would be a threshold and exemptions, which is how most taxes work.
Voloskaya 43 days ago [-]
How would you implement that in startup world for example?
It's very common for startups to be valued at ~20M$ 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 and probably won't care about their business anymore.
Now, as one of the founder, maybe you own ~40% of that business, so now your paper net worth is $8M, and just made $8M of unrealized gains in that year, how are you going to pay that?
There is no way you will ever find someone to buy $1M of your share at the price of that round, you probably wouldn't find anyone willing to buy your entire paper $8M for $1M, because again, the company isn't worth $20M yet.
This is true until pretty late in a VC backed company, most round aren't priced based on how a realistic buyer would value the company, they are priced based on complex dynamics. Even a large number of unicorn startups founders in the Series C/D stages would have paper wealth of potentially 500M range, but absolutely no way to find 50M.
So, you effectively have no way to pay that tax.
This system actually already pseudo-exist in Canada in specific conditions: If you stop being a tax resident of the country, all your assets are considered realized the year you leave and you must pay taxes on them. Which is effectively impossible for most startup founders, because again, your stock isn't actually liquid. This means you can't stop being a tax resident of Canada until your companies either dies or you exit somehow. To be clear you can't easily just choose to remain tax resident of Canada while living abroad, Canada gets to decide, to maximize your chance you must prove that you still have ties, so e.g. you have to keep a home, you have to keep your bank accounts opened there, you must visit often enough etc.
Canada revenue agency offers one alternative: You leave the country but leave your stock in their keep, on the day you actually realize the gains, they will take what they were owed, which sounds great, except if the company fails, or you realize gains at a lower valuation, they still consider you owe them what was computed the year you left, not the day you exit, so there is a real risk of being in debt for the rest of your life.
kemitche 43 days ago [-]
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.
Salgat 43 days ago [-]
You set a minimum threshold to trigger it, and you set certain realistic exemptions for things that would benefit society, including giving a VC time to mature.
jandrewrogers 43 days ago [-]
The vast majority of assets held by the ultra-wealthy are non-liquid. Thinking that these assets are "stock" that you can just "sell" is fundamentally misunderstanding the nature of the problem. You can't force realization for tax purposes because in most cases there is no feasible way to realize notional gains. Reality doesn't care if it is inconvenient for the government that assets with unrealized gains have no realizable value. The problem of asset value that is non-realizable is endemic in finance.
Additionally, in the minority of cases where it is plausible to force realization, doing so would destroy the notional value of the asset in many cases. The government will have to issue a tax credit, undoing any tax revenue they hoped to gain, but the business is now destroyed so there is no future tax revenue either.
Trying to prematurely force realization of asset value is either impossible or destructive in the vast majority of cases.
tsimionescu 43 days ago [-]
So what you're saying is that many asset values are purely fictional and don't correspond to a real value that anyone would pay. But, you think this is a good thing and that the government would ruin things if it foced asset values to be closer to what someone would actually pay for them.
I don't think your argument is as strong as you think it is. The value of an asset in a market economy is supposed to be what someone would pay for it. If you can't sell your Tesla stock for it's value, then it doesn't actually have that value.
Salgat 43 days ago [-]
Oh I'm fully aware of that the ultra wealthy will have to sell off some of their assets. Mind you if this exists, the market will automatically build this assumption into the net worth of an asset. If anything, it will help encourage diversification, overall improving the health of the economy.
doe_eyes 43 days ago [-]
> 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.
Because there is a ton of investments that aren't liquid, aren't trivial to value on an ongoing basis, and aren't infinitely divisible.
Again, a farm is a perfect example. Land prices are going up. Your family farm was worth n million, and is now theoretically worth twice that. Do you sell a portion of it to developers to pay the tax on the unrealized gains? Oh by the way, the land is probably zoned agricultural, so you actually can't.
Or, you buy a famous painting as an investment. Do you cut off a piece each year and auction it off?
Yeah, it's relatively easy for stock market holdings. But if stocks get unfavorable tax treatment, all this will accomplish is moving money away from the stock market toward assets that get a better treatment... like investment real estate, with all the problems that entails.
martijnarts 43 days ago [-]
If you buy a famous painting as an investment, I'd assume you have enough money to cover the taxes without having to auction it.
Accurately valuing the painting every year is definitely very difficult.
The same argument doesn't necessarily go for a farmer's farmland. The zoning could of course be calculated into the land value. But I'm unsure if farming economics allow for paying the taxes on those unrealized gains
hnaccount_rng 43 days ago [-]
But that's largely solved right? The banks that issue loans _against_ those assets do put a number on them! Just tax it based on this value. And since they are willing to lend money anyhow, the user can just take out a slightly bigger loan to cover the tax too.
Salgat 43 days ago [-]
Just to be clear, we're talking about a wealth tax above a certain threshold, think hundreds of millions of dollars to billions and billions. This has no application to anything remotely related to the "family farm". And yes, it is okay to force someone with a half a billion dollars in assets to sell off a small percentage for tax reasons, unless you think they should never ever be taxed for it.
doe_eyes 43 days ago [-]
I'm addressing the parent's proposal, which is to "why not just keep selling fractions of the asset to cover taxes".
Yes, if you're rich, you might have other ways to cover the liability, but that's not what the parent said.
And for what it's worth, these "billionaire" thresholds in political discourse are fairly meaningless. The last time the Biden admin "cracked down on billionaires", they instituted IRS reporting requirements for Paypal and eBay when you receive in excess of $600 a year. There just isn't enough billionaires for policies that truly target only them to make a difference, unless you flat out start taxing / confiscating wealth.
JumpCrisscross 43 days ago [-]
Attach a lien to the property. If it’s a small business, the government’s share of the step up is put against the business. There will still be shenanigans. But it avoids forcing liquidation wile preserving the state’s interest.
ryandrake 43 days ago [-]
This actually seems like a very reasonable solution. Although it would lead to perpetual liens on properties that simply get passed down dozens of generations, never getting sold. At some point, the music has to stop, or the rich will exploit it.
_DeadFred_ 43 days ago [-]
If someone leases a car instead of buying it in many states they still have to pay sales tax, just on each lease payment. Somehow we can figure out how to charge sales tax on non-sales sales when it impacts the average joe, but not income tax on non-income income when it impact business owners because 'think of the business'. I don't see how taxes when someone extracts value from their company is any different or more difficult than taxing Joe average 'sales tax' on a lease payment.
The business is irrelevant. We are talking about the tax on the person who is getting income because our government functions from taxes on income. Just like how we charge sales tax on a non-sale when state government functions on taxes on sales. Tax business owners when they extract value from their business.
efsavage 43 days ago [-]
There is definitely an obvious fix, just have collateralization be considered realization. You're welcome to have as much money on paper as you want, but if you want to post $Xm in stock against a loan, you need to pay taxes on it first.
hluska 43 days ago [-]
What happens if the value of the underlying asset depreciates?
Here’s a hypothetical:
- I own $100 of stock in Company A.
- The First International Bank of efsavage decides to accept that $100 in stock as collateral on a loan. So I pay taxes assuming a value of $100.
- When I dispose of the stock, it is only worth $80.
Will that be a retroactive credit, meaning that I will have to amend my tax return in the year that I collateralized those assets? Would it be a forward tax credit, meaning that I could apply that credit to future years?
I worry about this both from a bookkeeping point of view (since this is potentially a lot of credits) but also worry the ways it could be manipulated.
hnaccount_rng 43 days ago [-]
Why not just treat it as any other loss for tax reasons? If I understand this correctly, then the current state is basically: If you take losses you can use those to nullify a future gain. Just do that.
And.. the bookkeeping thing is really solvable. That's kind of what banks are for
a_c_s 43 days ago [-]
Why would you earn a credit?
You created a tax event and paid taxes on it and you got a loan for x% of $100.
If you sell the stock at $80 you'd pay no taxes on the appreciation (-$20). No credits, investing is risky.
mindslight 43 days ago [-]
There is a quite simple fix that already applies to the IRAs that most people use as their main tax deferral - if you take a loan using your IRA as collateral, that loan is considered a distribution from the IRA, and is thus taxed. Requiring capital gains to be realized when an asset is used as collateral wouldn't be nearly as problematic as you're making out. For example, if someone's company appreciates to $50M and they then wish to turn some of that abstract value into concrete cash, then yes it's time to pay some taxes. Those taxes can simply be paid with some of the money from the loan too, you know.
keybored 43 days ago [-]
> This is something people love to rage about, yet it's not one with an obvious fix.
Rage about. Off to a good start. I wonder what the conclusion will be?
> [look at all of these reasonable-looking arguments for the existing tax laws]
Sure. Most people are fine with rich people not getting taxed into the middle class or having to work for a living.
What does this prove about anything?
> These all suck, and the government generally collects money on assets as they move not assets at rest. I see no way to resolve it that isn't suckier than the status quo and so am left with the conclusion that people who agitate for such changes are more resentful of the rich than they are worried about the justice or lack thereof of tax avoidance.
Hmm. I knew there was something off about attributing “rage” straight off the bat.
I don’t know how you disentangle “justice” from “resentment” so easily. Resentment IS EXACTLY injustice over a sufficiently long enough time.
But I tend to see this idea that people who are upset about something real need to have... pure emotions. They must be upset because someone else (the poor maybe) are getting shafted. They certainly can’t be resentful (jealous) or something selfish like that.
(I don’t know what dimension you live in in the real world, confronted with these kinds of people, where this would be a compelling argument to anyone. Seems like a Let Them Eat Cake position.)
So people who are rightfully upset—you don’t even argue against that part—get dismissed because they have allowed impurity into their hearts. While the rich get to do their tax schemes. But, he shrugs his shoulder, better that the rich fleece the government than that the commoners have impure thoughts.
Adverblessly 43 days ago [-]
> These all suck, and the government generally collects money on assets as they move not assets at rest.
The government can also collect money on assets at rest (or at least, on cash at rest). They do so by creating money. It could be an interesting tax regime where the only forms of taxation are taxes to discourage action (e.g. tax on tobacco) and money creation.
eadmund 43 days ago [-]
> This is something people love to rage about, yet it's not one with an obvious fix.
Removing the step-up in basis seems like an obvious fix. Record the basis at the time of transfer, then charge taxes when or if it is sold. Adjust for inflation if that seems reasonable.
Is there anything wrong with this? It doesn’t require selling on receipt.
lotsofpulp 43 days ago [-]
Really easy, power law formula marginal sales tax rate. The more and more you spend, the higher and higher your sales tax rate is. Considering most spending happens via electronic payments, this should be easily trackable since we have internet/electronic databases/identifying numbers for each purchaser.
You get a 1099 or W-2 for income, why can there not be an equivalent for spending?
This plus power law formula land value tax rates would fix multitude of societal problems. Land values are also already in electronic databases.
And get rid of income taxes altogether. This would disincentivize hoarding and wasting, and incentivize working and being efficient.
The only other aspect of rent seeking I can think of that would need to be nerfed is copyright terms being reduced to 10 years.
43 days ago [-]
dietr1ch 43 days ago [-]
> These all suck, and the government generally collects money on assets as they move not assets at rest.
But staying at rest has been used as a way to sidestep taxes for so long.
I'd rather have all investments be taxed every K years as they were sold and bought back. Ideally with selling dates spread throughout the K days to avoid huge spikes.
kwanbix 43 days ago [-]
Pay a percentage over the difference between the original value (50m) and the death value 740M, to inherit, you have to pay taxes on the difference, with brackets, as first millon 0%, second million 10%, etc.
Voloskaya 43 days ago [-]
> Of course, as your company continues to appreciate, you will be forced to continue reducing your ownership stake
Why?
In an hypothetical world where getting a loan on an asset is impossible (or taxed the same as realizing the gains), you still don't get taxed on unrealized gains.
You can leave your stock alone and you aren't forced to sell anything.
Of course if you decide that now that you are worth a billion you must live like a billionaire, then yes, you will have to sell stock, reduce your influence in the company and pay tax on the gains.
I don't see any problem with this? It offers a way for the stock owner to choose if they want to use the stock as power (don't touch it) or as cash (sell it), only taxing you when you opt for the later.
edit: I realised I might have misread your post as defending the system allowing one to use unrealized gains to back a loan, hence enabling the buy/borrow/die loophole, when you are in fact defending against taxing unrealized gains. To me the obvious fix is to prevent those loans as discussed above: force people to choose how they want to use their assets, if they choose to use them to live like kings then they must pay tax.
travisb 43 days ago [-]
The fix in your edit isn't an obviously workable fix though. When talking about the rich, it's best to talk about private corporations -- because that's really how the operate.
Firstly, do you want to prevent corporations from taking loans against their assets? Preventing that seems like it would be quite detrimental.
Secondly, how do you differentiate legitimate corporate expenses from personal expenses? Is a billionaire having one of their corporations rent a yacht from another of their corporations for a business meeting with another CEO who just happens to also be their friend a legitimate business expense or a personal expense? What if the yacht rental company rented it to the CEO's company instead?
mcguirep 43 days ago [-]
If one believes it’s a big problem, it seems to me there’s an easy solution that doesn’t disrupt anything else. If you use a stock as collateral like that, it’s a taxable event that steps the basis of the stock by the amount of the loan. No unnecessary taxation of assets at rest, no double taxation later because of the step up in basis, and you close the loophole if you view it as such.
43 days ago [-]
fallingknife 43 days ago [-]
You missed the obvious one - borrow against the asset to pay the tax.
_bin_ 43 days ago [-]
I mentally bucketed that in "try to find money": if you're not selling equity, debt is one way to do that. But the caveat - less money for R&D, expansion, and employees - still applies.
a_c_s 43 days ago [-]
Not really, nobody goes "ooh, the stock price is up 5% this year, we can hire 5% more employees!"
Most stock wealth isn't doing anything for the company. If the stock price of Apple went down by 90% tomorrow for no reason, the main effect on Apple would be... almost nothing.
The employees who get equity compensation would be mad but they don't use their stock value to fund R&D or expansion or salaries.
Detrytus 43 days ago [-]
But if you have "unrealized gains" tax you should also have "unrealized losses" tax deduction.
Also, instead of Apple try imagining NVIDIA: their stock went up like 1000% in two years, they are now a trillion dollar company. If they had to pay tax on that it would bankrupt them. Or, they could use all their cash + borrow some money against the stocks to pay tax. But then the stock can suddenly crash 90% and the lenders, seeing how their collateral is now 90% down might start demanding repayment of the loans, again, bankrupting the company.
"Unrealized gains" tax simply does not make sense. It's just greedy government attempt to squeeze more money from businesses.
a_c_s 36 days ago [-]
You aren't arguing against what I wrote: an investor currently pays no tax on their own stock going up.
I'm suggesting if an investor in NVIDIA uses their $100 Million in stock that they bought for $10 Million to get a loan they would have to pay capital gains on that $90 Million capital gain. Just like they would have to pay capital gains when they sell the stock.
No stock sale has to occur - the investor could pay $18 million in taxes out of their loan.
When we decide to tax things is inherently arbitrary: I'm suggesting that we count "borrowing" against an asset as a taxable event which is a simple and straightforward change that makes buy-borrow-die more equitable: government gets taxes at the same time as the investor gets the benefits.
Detrytus 28 days ago [-]
But that’s the thing: until you sell all the “capital gains” are illusionary: you borrow against your stock and tomorrow it falls down 50% and now you’re double screwed because you owe tax on those illusionary gains and your bank is also after you, demanding extra collateral on your loan. So your proposal would essentially ban borrowing against stocks completely
schmidtleonard 43 days ago [-]
[flagged]
vikingerik 43 days ago [-]
The problem with directing tax heat towards assets is that you chase away the assets to more favorable jurisdictions (ie, overseas.) Real estate / property tax works because land can't be moved. But if you tax capital in the US, the capital holders will simply leave the US.
_bin_ 43 days ago [-]
If the only value you can add to this thread is calling me a clown or a useful idiot, please comment elsewhere. But to seriously respond to what you said, I don't understand how you can have a good faith belief nobody can possibly see the world differently from you. There's quite a lot of downward mobility out of the upper quintiles of wealth in America. "Getting paid for being rich" usually only applies if you're rich and smart and you deploy your assets in an economically productive way. After all, there are more than enough rich people who go back to being poor.
If you refuse to believe anyone who doesn't share your view of class struggle is either stupid or malicious, I don't see why you bother engaging at all.
jandrewrogers 43 days ago [-]
A caveat is that this strategy requires owning assets with a lot of liquidity. One of the points raised during the whole “taxing unrealized gains” episode is that the vast majority of assets (~70%) held by the ultra-wealthy effectively have very little liquidity. As a consequence, they can’t really be used as cheap collateral for secured debt.
HeyTomesei 43 days ago [-]
I began my career doing this (Deloitte Tax's Private Client Group).
Yes, it is truly fascinating.
skizm 43 days ago [-]
I was under the impression that the estate has to pay the debts before the assets are disbursed, and the step-up basis occurs, thus collecting all appropriate taxes, just deferred until after death. This reddit post says the opposite is true. I cannot find the answer via Google. Does anyone know the order of operations?
If the step-up basis occurs first, the fix here seems very obvious, but I assume ultra-wealth people have lobbied to keep that from changing?
mindslight 43 days ago [-]
The asset value minus the debt (both on the date of death [0]) is what contributes to estate tax liability on the 706 form [1]. Then going forward, the asset basis is stepped up to what it was on the date of death (for both the estate entity and downstream beneficiaries), based on the idea the asset has already been taxed by the estate tax. This assumption falls apart when there isn't much value left in the asset-minus-loan that counts for estate tax, because most of the value had already been realized and spent during the decedent's lifetime.
[0] ignoring the "alternative valuation" option
[1] at least per my "decoupled" year 1999 understanding. And no, that doesn't mean my experience is from 1999.
RustyEarthfire 42 days ago [-]
The "already taxed by the estate tax" justification is ridiculous to start with. If you have unpaid income tax it doesn't get waived to avoid "double taxation"; certainly you don't get a refund on all the taxes already paid on your savings. But if you kick the can down the road long enough with unrealized gains then you get a special bonus?
mindslight 42 days ago [-]
shrug that's just the way it was explained to me and it seems plausible. Long term capital gains is 15 or 20 percent, whereas the estate tax rate basically starts there and goes up to double. If someone never realizes their gains, then perhaps it makes sense to not be taxed on them. The loophole here is living people realizing their gains, but doing so using loans so they can avoid paying taxes on them.
skizm 43 days ago [-]
So if I take a company public, and now own $10B in shares in a liquid stock (that I paid $0 for), take out a $1B loan, spend it all, and then die. What taxes need to be paid by the estate in that scenario?
mindslight 43 days ago [-]
First, a disclaimer that shouldn't even need to be said, but the legal regime being what it is - I'm not an accountant nor an attorney, but rather an just engineer that digs into the specific details of things rather than paying professionals to screw it up for me. So there is no warranty or representation for anything I'm saying, and it's merely meant as starting pointers for your own independent analysis. Being a Random Internet Commenter, perhaps I'm even purposely giving out bad advice because I want people to end up paying more taxes to the government.
In your scenario, the Estate Tax would be calculated on $9B. The executor/per.rep of your estate would then have $10B shares with a $1B loan against them. The basis of the shares would be their current value, so if they (or your heir(s)) sold $1B shares to pay off the loan there would be no capital gains tax. There would also be no capital gains tax if they sold the other $9B shares (but Estate Tax was paid on them instead). Of course, they might have to sell some of the $9B shares to pay the estate tax bill.
Where things get really interesting is the charitable contribution deduction. If you sell $1B in shares and donate $9B to a nonprofit (likely set up and controlled by you, and subsequently your heirs), then you get a $9B deduction on your taxes (wiping out the capital gains on the $1B). Then no estate tax, since they're not yours when you die. From what I understand it's also a great asset protection strategy against random creditors.
When we're talking billions and minimizing estate tax, the latter dodge is more applicable since it's going to awfully hard to actually spend down billions. The loan plus stepped up basis dynamic is more about dodging capital gains taxes while actually realizing and spending the gains while you're alive, which isn't really captured by your scenario.
skizm 42 days ago [-]
Cool, thanks for the info! Definitely feels like they should just tax any asset sales needed to pay debts before the step-up happens, but I’m sure there’s a lot of push back against that idea.
mindslight 42 days ago [-]
That feels like the wrong approach to me, because this topic seems like a loophole in capital gains tax rather than estate tax. Taking a loan using untaxed assets as collateral is essentially realizing (most) of the income from the assets as cash. Capital gains tax should apply then.
Also, flip your example around and say someone took a $9B loan [0] against their $10B in stock. Now when they die, their estate has only $1B worth of net assets, yet ~$4B in estate tax liability under your idea. It's better to prevent this situation from happening by making the taxes due ahead of time, similar to how once you give away enough taxable gifts (form 709) you need to actually start prepaying what would have been paid by your estate.
[0] and somehow spent it. I stuck with the billions figures because it makes the analysis easier (tax rate asymptoting out to the top bracket), but this is likely to be more relevant with much smaller estates.
mindslight 42 days ago [-]
Furthermore, another example of using the loophole that doesn't even involve estate tax:
$10B worth of stock ($0 basis), take a $9B loan on it, then donate the encumbered stock to a charity that you don't even control. Now you've realized 90% of your gain, (more than if you were to have paid capital gains tax), plus you get a $1B deduction from the charitable contribution. When the charity sells the stock to pay off the loan, they also don't pay capital gains due to being tax exempt.
The charity thing is another loophole that needs reform (and doesn't even seem to be talked about), but you don't even really need a charity - get the net value much closer to zero, and gift it to arbitrary non-rich person(s), probably near the end of their life. They can liquidate stock, live off the money, and give away non-legible gifts before the tax bills start to catch up a year and a half later.
This topic is really about a hole in the capital gains tax, and it's unfortunate to see so many commenters focusing on the estate tax and ending stepped up basis (seemingly because that's the way the political winds are blowing), when most estate planning just sidesteps the estate tax. For example this original article is exceptional because most people with $7B in possible estate tax liability would head off that situation by the use of giving, trusts, and whatnot. If those people are still allowed to use this loan loophole to avoid capital gains while living, then you haven't really fixed the problem.
43 days ago [-]
43 days ago [-]
frinxor 43 days ago [-]
ah missed this one, thank you!
ThePowerOfFuet 43 days ago [-]
Is it just me, or is it really wild seeing the hypothetical person being referred to in the Reddit post as a "taxpayer"?
rufus_foreman 43 days ago [-]
Can you explain to me what a post about avoiding taxes has to do with a post about not avoiding taxes?
Jedd 43 days ago [-]
I don't expect you were genuinely seeking an answer, however I'll point out that the crux of the mystery described in TFA was that it was such a rare event - someone tremendously wealthy didn't avoid this tax - that it was note-worthy.
lantry 43 days ago [-]
we regularly get comments like this, and people on HN still question the value of a liberal arts education
omeid2 43 days ago [-]
Are you joking? How is here is an extreme case of X doesn't relate to an extreme case of -X?
Amorymeltzer 43 days ago [-]
Matt Levine touched on this briefly today, and I liked his two cents:
>It’s kind of cool? Like you could imagine a hierarchy, in roughly ascending order of wealth:
>Too poor to pay taxes.
>Rich enough to pay taxes.
>Rich enough to not pay taxes.
>Rich enough to not even bother with not paying taxes.
leprechaun1066 43 days ago [-]
In 2021/2022 there were 60 people in the UK who probably fall into that last group. Together their taxes accounted for about 1.4% of the UK tax bill despite being something like 0.002% of the population.
arcticbull 43 days ago [-]
Are you familiar with the concept of noblesse oblige?
Further does this include all taxes or just income taxes which are only a portion of revenues used to make less well off people look like moochers.
For instance, in the US, there’s social security and Medicare taxes -- and payroll tax, the social security and Medicare tax contributed on behalf of employees by employers. Renters also pay their landlords property taxes. Sales taxes, tariffs, etc are all born by end users.
fallingknife 43 days ago [-]
Renters do not pay property tax in the US. That liability is entirely on the owner.
rahimnathwani 43 days ago [-]
Your statement is technically correct. It's also technically correct to say that diners, not restaurant owners, pay sales taxes.
The reality is more nuanced. Introducing a sales tax on restaurant meals affects both diners and restaurant owners: restaurant owners can't pass on the whole increase to diners, and diners cannot afford to go out as much.
Similarly, property tax levels influence landlords' decisions to enter or exit the rental market, impacting housing supply and, consequently, tenant rents.
'Paying' a tax has two distinct meanings:
- Who bears the economic burden after the tax is introduced
- Who is legally responsible for paying the tax
These two concepts are not always aligned.
zajio1am 43 days ago [-]
I appreciate your nuance, as mixing up economic burden and legal responsibility for taxes is a common fallacy in discussions. But specifically for rents in supply-constrained cities, i would guess that supply is highly inelastic, therefore market rate of rents is already as high as acceptable by renters (i.e. determined by demand curve) and therefore property tax would not affect it much.
fallingknife 43 days ago [-]
This is a silly distinction because by that standard you could equally say that my employer pays my rent because they are the source of income which I use to pay it.
Property tax in the US is a liability of the owner. This is in contrast to other systems like the UK where it is a liability of the occupant.
rahimnathwani 43 days ago [-]
The incidence of taxation is a well-studied concept in economics, with a solid theoretical foundation and empirical evidence backing it.
You dismiss its application as a 'silly distinction' and repeat the fallacy that the incidence of taxation falls on the party who is legally liable.
If you don't believe me, and don't want to read up on 'tax incidence', consider what would happen if sales tax were paid by retailers instead of customers. Would the flow of money change at all? Would any party be worse off or better off?
lazide 43 days ago [-]
This is an entirely ridiculous argument. Who actually ‘writes the check’ is actually important in a discussion about who writes the check, despite the fungibility of money. Renters don’t pay the owners property taxes in the US, even if they pay rent. Full stop.
Why this matters is because in some cases, owners can end up ‘under water’ with even rent not covering property taxes in the US.
In other places, that may not be possible.
eastbound 43 days ago [-]
No, really, it has been studied, taxes affects both supply and demand. It’s one of the first chapters of any microeconomics book.
lazide 43 days ago [-]
you might want to actually read my comment. the details matter.
arcticbull 43 days ago [-]
Well, I get charged sales tax when I buy something at a store, itemized on my receipt. But the store writes the check to the state, and I write the check to the store. Did I pay or did the store? And why does it differ from a renter? Are we splitting hairs over itemized vs unitemized receipts?
And what about a retail store in England where the VAT isn’t itemized? Did I pay or did the store?
lazide 43 days ago [-]
No landlord in the US itemizes, or even lets you see the property tax they are paying anywhere they can control. You can dig it up if you know where to look though, usually, from public sources. Same with the landlords financing costs.
And it varies between much lower than you would expect, to much higher - and doesn’t generally change the amount they can charge in rent between the two scenarios. Though of course, landlords will go broke eventually if on average rent doesn’t exceed property taxes, finance costs, and other costs they pay on average.
Competitiveness/survival between landlords over
time will often hinge on their ability to pick the best options and structure/time this well to minimize their costs while maximizing their returns. A much harder problem than I think anyone who isn’t in that game realizes.
Which is why successful property management and investment strategies vary quite a bit depending on these specific details, like who pays what, when, and under what circumstances.
So all I’m getting from what you’re saying is you don’t actually understand what you’re talking about concretely, and you’re going off a first year economics textbook instead of actual experience.
Am I correct, or not?
arcticbull 43 days ago [-]
Could you answer my question about itemized vs unitemized sales taxes in the US vs UK and whether you think it relevant?
lazide 43 days ago [-]
Of course it’s relevant to the business models, specific prices charged, marketing, and general economics.
In a way that means the details matter and you’ll get different end prices, even for the same nominal tax rate, depending on how it is applied.
For instance, when sales taxes are not shown at point of choice (on the shelves) they tend to not impact consumer behavior (US), where when they are (most of Europe), they do.
Which is also why in the US, retailers tend to fight efforts to include sales taxes into on-the-shelf prices. Because they know it will impact sales.
Just like in jurisdictions where renters pay/see property taxes, that impacts their choices, where in places they don’t, it doesn’t. At least in any specific, individual way.
arcticbull 43 days ago [-]
My question was about whether an itemized receipt changes who pays
lazide 43 days ago [-]
Not having an itemized receipt certainly changes who people think is paying, and for what, eh? And making decisions when there is no ‘itemized receipt’ matters too, doesn’t it?
That is my point.
43 days ago [-]
NoMoreNicksLeft 43 days ago [-]
Some say that the owners should be permitted to pass that tax bill along to the renter in the form of increased rent. Can't someone think of the poor starving landlords?
Seriously though. Renters pay the property tax, even if they don't get to see the bill.
jjav 43 days ago [-]
> Renters do not pay property tax in the US.
There's a simple way to visualize why is not true:
You're renting a property for $1000/mo. Whatever the owner is paying for property taxes, you don't know.
Then, property taxes go up by $200/mo. Do you think your rent won't go up by at least $200/mo as a direct consequence of the tax increase? Because it will. Because the renter is of course paying for all costs, including those taxes.
kaibee 43 days ago [-]
> Then, property taxes go up by $200/mo. Do you think your rent won't go up by at least $200/mo as a direct consequence of the tax increase? Because it will. Because the renter is of course paying for all costs, including those taxes.
So, before property taxes went up, the landlord could have raised rents by $200/month, but hadn't because..?
jjav 43 days ago [-]
> So, before property taxes went up, the landlord could have raised rents by $200/month, but hadn't because..?
Because you don't pre-date inflation.
It is the same as asking why the supermarket doesn't raise the price of milk to what inflation estimates say it'll probably be next year.
munksbeer 41 days ago [-]
>So, before property taxes went up, the landlord could have raised rents by $200/month, but hadn't because..?
Look at it a different way. If the $200/month was a new tax that all renters had to pay, what would happen?
freejazz 43 days ago [-]
Could he have?
bluGill 43 days ago [-]
Rent does not go up because your landlord has to compete with a landlord one town over where the tax didn't go up and so if your rent goes up you will just move.
NoMoreNicksLeft 43 days ago [-]
Your landlord knows moving is a hassle that you'll avoid if it means paying a little more. So he raises it just enough that you won't just pack up the Uhaul and go live there. Then over the next few years, he does the same again, when he can, until he recoups the property tax, or near enough of it.
Some landlords are bad at guessing the correct numbers. Others are savants. In aggregate, renters end up paying almost all of it over time if not immediately, and those that don't end up suffering in other ways (when the landlord just stops paying the tax entirely, but taking your rent, the building gets sold, and you don't get to renew the lease because they're going to knock it down and build luxury condos).
arcticbull 43 days ago [-]
That requires getting a different job, my friend. Vendor lock-in with housing is real.
bluGill 43 days ago [-]
In Singapore and a few other places. However in the US housing is not a government monopoly (sometimes low income housing is). You can always find a landlord in a different town. No need for a new job as you still live in the same metropolitan area.
arcticbull 43 days ago [-]
Ok but what if the landlord raises rent by $200, while commuting would cost me an extra $250. Or what if I move from a town with good public transit to one where I have to drive by your own admission, several towns over.
What if moving costs $1000, which is another $83 per month over a year.
bluGill 42 days ago [-]
Note that it doesn't need to you personally that moves. Even people who would move anyway will force lower rents just to attract new renters. It takes longer this way but renters typically search a large area when looking for a new place and they care about their costs vs ammentities.
bluGill 43 days ago [-]
Commuting will not cost you an extra $250 in any world I know of. You are typically only moving a biking distance here.
fallingknife 43 days ago [-]
No it won't. The rent will not go up until the lease is up. And at that point it still won't necessarily go up by 200 bucks because that's just not how markets work.
wiseowise 43 days ago [-]
> In 2021/2022 there were 60 people in the UK who probably fall into that last group. Together their taxes accounted for about 1.4% of the UK tax bill despite being something like 0.002% of the population.
How much wealth do they have compared to other population?
vlovich123 43 days ago [-]
What percentage of the wealth did they control?
schiem 43 days ago [-]
By summing up the top 60 entries for UK billionares from The Times Rich List for 2024 (which is data from 2023), I get almost exactly 500 billion pounds in net worth (£499.55bn). According to Wikipedia, the UK had a total net worth of $15,972bn USD, which comes out to £12,298bn at the current exchange rate of 0.77 pounds / dollar.
That comes out to around 4.1% of the total wealth. However, the number from Wikipedia is from 2022, so this figure isn't going to be entirely accurate.
rootusrootus 43 days ago [-]
The implied assertion with that metric is that every individual taxpayer should pay the same amount. That seems like a hard sell.
gloosx 42 days ago [-]
And the apex of it:
> Rich enough to control a dominating force of violence - collect taxes.
H8crilA 43 days ago [-]
[flagged]
Kapura 43 days ago [-]
Pretty obscene that somebody could have so much wealth that $7,000,000,000 is just the tax bill. Also weird that it's framed as a "gift."
sushid 43 days ago [-]
The article highlights that it’s not actually that hard for the ultra-wealthy to avoid a massive estate tax bill through proper tax planning and investment strategies. What’s striking here is that this individual wasn’t even the richest person to ever die, yet he paid the largest estate tax in history, likely by choice.
bluGill 43 days ago [-]
> likely by choice.
There is an element of competitiveness there. Some rich want to be known as rich and so they can brag about paying the most taxes that in turns implies they have the most money. Others want to be quieter about their wealth and so don't want you to know they have it and wouldn't tell you how much taxes they pay.
rootusrootus 43 days ago [-]
If he were doing it competitively, I don't understand the strategy. His name was leaked, not announced, and since he is dead he cannot feel like he won the competition.
deepsun 42 days ago [-]
Sometimes rich could not find a way out of paying a large tax, so instead they pull at least some good from their bad situation, and make it a PR.
And it's a good thing that government is strong enough to be able to collect large taxes. Contrary to popular opinion, rich people are mostly OK paying large taxes, but only as long as all other rich pay their share as well. The grudges they hold are only about unfairness, not about amounts.
42 days ago [-]
somethoughts 43 days ago [-]
Interestingly a lot of the larger philanthropic organizations are just as administration heavy as the US government and suffer from the same mission creep and the same obfuscated, bureaucratic decision making process, etc. Not to mention the leadership is often richly compensated (i.e. $1M in salary) and non-elected.
In fact we should probably celebrate gifts to the US government more than we do.
schneems 43 days ago [-]
> we should probably celebrate gifts to the US government more than we do.
I had the idea that we should put a donation box on tax forms. The 100 top donators get on the “US 100” list (like Forbes) but it’s based ONLY on how much you donate, not how much you claim to be worth.
It’s one thing to claim to be rich to a Forbes reporter, it’s another to have the (tax) receipts to back it up.
vanjajaja1 43 days ago [-]
reminds me of the way dubai auctions off the 3 digit car license plates, then hotels do things like only letting low number license plates park out front
t0mas88 43 days ago [-]
Brilliant move, then use the money to support those that are less well off. You can have the ultra-rich bragging about how much they paid, while those that need it most are benefitting. A real win-win.
vanjajaja1 41 days ago [-]
yep, iirc on the huberman podcast on testosterone it even said that the competition that's decided by society has an impact on t-levels. societies that make prosocial / win-win games for men obv end up better off
rootusrootus 43 days ago [-]
> I had the idea that we should put a donation box on tax forms.
I don't believe it's on a tax form, but you can absolutely just donate money to the US. They make it very easy, just go to pay.gov.
Most tremendously wealthy people don’t want to be known for being tremendously wealthy. Unless being known for being tremendously wealthy is a part of your wealth accumulating strategy, the attention it brings is almost entirely negative. Being tremendously wealthy without millions of people constantly chirping about clawing as much of it away from you as possible, or demanding an explanation from you every time you wipe your ass is a far better outcome, and most people who are savvy enough to become billionaires are savvy enough to figure that out pretty quickly.
schneems 42 days ago [-]
> Most […] don’t want to be known
But some do.
M95D 43 days ago [-]
Only the ones at the top of the list would be interested in donating and keep donating. If a rich person calculates that he could only reach the 57th place by donating a large part of his money, then he would have no incentive to donate. 57th place means nothing.
schneems 43 days ago [-]
The key though is that you don't know how much everyone else puts in. There's a psychological effect of seeing the amount and saying "That's it? I can do better than that." It's basically a silent auction.
> 57th place means nothing.
It means you're on the board and got one higher than 56th place. I'm a top 50 rails contributor, that means something to me and to others.
It's kinda like F1. Some teams are racing for the constructors championship. Some teams are racing for the midfield. All of them are racing for even a single point and to stay in the game.
dh2022 43 days ago [-]
Billionaires flaunt their wealth via yachts, mansions, space rockets and super-PACs. Which to me seems way more fun than getting your name on a tax list…
safety1st 43 days ago [-]
I think it's a great idea. It would generate good press for the donors and some billionaires care a lot about that. Guys like Buffett would do it. It's basically free money for the government.
HeyLaughingBoy 43 days ago [-]
That's not flaunting it; that's just buying things you like because you have the money. Flaunting would definitely be getting your name on a list that you don't need to be on.
freejazz 43 days ago [-]
Gigantic luxury yachts of ever-increasing lengths are absolutely flaunting.
> Flaunting would definitely be getting your name on a list that you don't need to be on.
Oh, like a list of the largest yachts and their owners?
jimcsharp 43 days ago [-]
My hunch is that taxes are the most efficient 'charity', even with the bloat, and everyone's too busy sniffing farts in their corner to see it.
bluGill 43 days ago [-]
Taxes are not and never will be because no two people have the same priorities. Even if my favorite charity is only 10% as efficient as the government in doing what I want, a donation to that charity does what the charity does. A donation to the government goes to military, welfare (social security, medicare...), roads, scientific research, and a long long list. If I want to put extra money into say Lymphoma research $10,000 to a really bad lymphoma charity will get $3000 to research (finding a lymphoma research charity that bad is left as an exercise for the reader - the ones I'm aware of are considerably better). The same $10000 to the government will add nothing to lymphoma research since the share of the budget going to that is a rounding error.
wizzwizz4 43 days ago [-]
But if you and a million other people, all with differing priorities, all agree to pay taxes…
bluGill 43 days ago [-]
Most of the right wing who is against taxes still agree to pay taxes on something. They disagree what taxes should go for and how much, but they generally agree some are needed.
Society is about the compromise. However that compromise makes nobody happy.
mozman 43 days ago [-]
No thanks, I’d rather keep more of my paycheck.
schneems 43 days ago [-]
The ultra rich don’t get paychecks. If you’re thinking in terms of “paychecks” you’re not who they are talking about when they say “tax the rich.”
bialpio 43 days ago [-]
100% this. This reminds me of what my SO says: if you have to work, you are not in the upper class. I don't think I agree with this statement fully (I personally think that top decile by income is already upper class), but I feel like I'm becoming more open to re-evaluating my opinion...
bluGill 43 days ago [-]
Most upper class work. They work different jobs, but they are generally not sitting around retired. They might or might not get a paycheck, but they are working. (if you own a restaurant you will probably pay yourself minimum wage when you do work - dishwashers start at double that - talk to your accountant but this is often the best legal way to handle your hours that are trackable) Steve Job's was famous for taking a salary of $1/year - he clearly was working and upper class.
triceratops 43 days ago [-]
But they don't have to work.
bluGill 43 days ago [-]
Most middle class don't have to work either - they are just not willing to accept the lifestyle that forces. Even poor people could find enough savings by 30 to not work if they really want to live that lifestyle. (I don't blame anyone for not wanting to live like that)
triceratops 43 days ago [-]
> they are just not willing to accept the lifestyle that forces
Jeez the pedantry around here.
Let me spell it out: Upper class people don't have to work to maintain their existing lifestyle. Steve Jobs could have continued wearing black turtlenecks and paying fines for parking his Mercedes in handicapped spots for the rest of his life, without doing a lick of work. That he didn't is a credit to his work ethic and passion for the work.
bialpio 43 days ago [-]
Out of curiosity, how much money do you think is needed to survive ~55 years ("savings by 30" + life expectancy around 85ish = 55yrs) without working? Also, please spell out biggest assumptions you're making.
bluGill 42 days ago [-]
Eat rice and beans $50/month. Live in a $200 tent with a warm sleeping bag replace every 10 years. every year you get $100 for clothing at goodwill (walmart for underware) No other possessions. don't get sick as you don't have health care, but you should on average live to 70 or so [5-10 years less than average with health care], assuming you are not unlucky. so about $70/ month.
I wouldn't want to live like that and I wouldn't wish it on even the most undeserable (life without parole prisoneers). you could do it. Some do it for a month or two in college as they see the world - but they go back to a more normal life and just fondly tell stories.
bialpio 42 days ago [-]
You may want to revise the life expectancy estimate on a rice+beans diet, scurvy is a thing and based on my googling you would not get enough vit. C. I'm probably missing some other disease too, so "don't get sick" is probably also out the window on this diet.
One can of beans is ~400kcal and costs ~$1.30+tax in my closest QFC, so you need around $4 per day just for beans (3 cans). 5lb bag of rice (50 servings, 160kcal per serving) is $5.50, & you need 5 servings per day to reach 2000kcal, so +55¢. That's $135/mo just for rice and beans, and I have not checked if that satisfies daily protein intake needs.
Where will you set up your tent without getting arrested? Needs to be walkable from a Goodwill, otherwise you need transport once a year. How are you cooking the rice? Where are you getting the potable water from?
Decent sleeping bag is another $100.
Even your unserious response is underestimating the amount of money required.
bluGill 42 days ago [-]
Bags of dry beans are a lot cheaper than cans. there should be room for a few vegitables in the budget.
bialpio 42 days ago [-]
Not if you have to pay to set up your tent legally, which you conveniently forgot to respond to. The only place I found so far that is free is BLM dispersed camping, but they allow only 14 consecutive days in 28 day period, and those places are far from civilization, so buying those beans is going to be a challenge.
Sorry, but with such an outrageously low estimate (US poverty line is $15k a year), you have to put in a bit more effort and show some receipts.
40 days ago [-]
enos_feedler 43 days ago [-]
Not only that but it’s also the structure that enabled the riches in the first place. I don’t see why more people don’t do this.
advael 43 days ago [-]
Mostly because of a very successful propaganda campaign by people who sought to loot the post-war economic boom
Generally speaking, the sad truth of a complex economy is that coordination is hard, and there's usually a short-term privatized gain to be had by someone willing to poison the future and the commons. No amount of benefit to humanity overall or even the specific society such a person lives in will convince a person who simply doesn't care about anyone else. Fortunately for humanity, a very small minority of people actually operate like that. Unfortunately for humanity, some of them have managed to accumulate a lot of power
I always wondered if there was a way to effectively "burn" one's entire wealth, creating a small deflationary event that would increase the value of existing dollars. How could one do this? Donate to the Federal Reserve? Or would you literally have to cash everything out and burn it?
hollerith 43 days ago [-]
According to my understanding, burning US dollar bills, donating to the Fed (if such a thing is possible) and donating to the Treasury are approximately equivalent in their effects.
What puts a lid on how much money the Fed creates is the desire to keep inflation to reasonable levels, preferably 2% per year. Your burning your cash allows the Fed to create more while adhering to their inflation target. Someone please correct me if I am wrong, but my understanding is that although the Fed decides how much money is created, the Fed is not allowed to keep or to spend newly-created money, but rather must give it to the Treasury (perhaps through some complicated or non-obvious mechanism) which makes it available for the government to spend.
MobiusHorizons 43 days ago [-]
At least one way they do this is to buy treasury bonds. It is not clear to me what happens to the interest though .
sdenton4 43 days ago [-]
In fact, dragons are important stabilizing influences in dungeon economics. The hoard of gold isn't inflationary until the adventurers liberate it and start buying wands and stuff.
patwolf 43 days ago [-]
Reminds me of something I read years ago about how Ultima Online would create "gold sinks", super expensive items that served no purpose other than help remove gold from the economy and prevent inflation.
endgame 43 days ago [-]
This is a problem with all kinds of virtual world economies. Players accumulate so much gold that some substitute becomes more useful. Diablo II had the Stone of Jordan, for example.
koolala 43 days ago [-]
I guess the trick there is they don't spend it. The money leaves the virtual economy. IRL that's impossible.
Couldn't you just not spend or invest the money? I think putting it in a chest and burying it in an unmarked location would be equivalent to burning it.
willcipriano 43 days ago [-]
A big part of modern monetary theory is taxing the newly printed money and putting it towards (wasteful) government programs to "burn it" in a sense.
Predictably, politicians who support MMT only did the printing part and skipped that bit once inflation started.
bialpio 43 days ago [-]
That does not feel like burning the money, more like propping up the private sector (naively, government's deficit is going to be private sector's surplus if you don't actually reduce the amount of money in circulation).
VirusNewbie 43 days ago [-]
How does that burn the money? If the government is spending the money, it's going to federal employees and purchasing good and services from the general economy.
willcipriano 43 days ago [-]
That's where the wasteful bit comes in.
If the taxed dollars ended up with say hurricane victims or other struggling Americans, those dollars would chase goods and services domestically driving up the price of those goods.
Now consider if instead you helped fund Israels socialized medicine program or paid off some of Ukraines debt or paid interest to Chinese creditors. Those dollars wouldn't have much effect when it comes to increasing the price of eggs in the US as they are being spent far away in another economy.
A similar effect could occur if the money ended with the wealthy folks, say wealthy owners of private defence contracting firms, as those dollars might chase building a super yacht (inadvertently employing some people but also consuming foreign made materials and labor) instead of trying to rent an apartment in Iowa. Less dollars chasing Iowa apartments, considering supply and demand, lower prices, lower CPI.
Take dollars from the middle class who will drive up the cost of the American dream and instead give them to people who will drive up the price of luxury goods.
It's never explained this clearly beacuse people would riot, but with this framework the choices of government in the last few decades or so suddenly makes more sense.
(I don't endorse MMT)
hgomersall 43 days ago [-]
I'm yet to meet anyone that actually understands MMT and doesn't endorse it. You might be the first, but I doubt it. Which bit of MMT do you have trouble with?
willcipriano 42 days ago [-]
The political will only exists to do money printing part in practice. The rest is a pipe dream.
hgomersall 42 days ago [-]
So no, you don't understand it?
willcipriano 42 days ago [-]
So, its implemented then?
hgomersall 41 days ago [-]
"implemented"? What does that mean? MMT accurately describes the monetary operations and fiscal constraints of a sovereign government (i.e. with their own currency) and from which you can predict outcomes with a high degree of reliability.
Insomuch as "implemented" means using the policy prescriptions (specifically, the job guarantee), there are no countries doing that, but various real world experiments have touched on it.
Japan had done things differently (albeit from a different perspective of mainstream economics) and is a good test case for the MMT model, especially given how many bet against the yen (and lose), implying the mainstream models are struggling there.
willcipriano 41 days ago [-]
I said the political will does not exist (in several different ways) now you say:
> Insomuch as "implemented" means using the policy prescriptions (specifically, the job guarantee), there are no countries doing that, but various real world experiments have touched on it.
Something that you can't implement, doesn't work. In practice MMT is a smokescreen for politicians to print money for their friends.
hgomersall 41 days ago [-]
The point is, you don't "implement" MMT. It's a useful framework for analysis regardless of what policies you choose. If we could get to the point of discussing monetary and fiscal operations from a sound basis, then we can start debating policies, but we're so far from that at the moment.
willcipriano 41 days ago [-]
I'd argue a less correct framework that you could actually sell to voters and politicians would be more successful by the virtue of its policy actually being implemented (not just the fun bits).
I can find you far more people who wish to abolish the fed and return to the gold standard than people who are willing to have the levels of taxation required to limit the inflation caused by funding the government with unsound money.
MMT's advocates policies would work if it wasn't for that pesky democracy and realities around campaign finance.
hgomersall 41 days ago [-]
Right, so I suggest now you're highlighting your lack of understanding. What do you mean by "unsound money"?
willcipriano 41 days ago [-]
I see no point in arguing further as what you suggest is entirely a pipe dream.
kelseyfrog 43 days ago [-]
It helps to conceptualize the circuit of money as it flows from government(G) to the private sector(P) back to the government as G-P-G. The outlays(G-P) and receipts(P-G) can both be increased or decreased to affect aggregate demand. MMT's view is that inflation can be a result of aggregate demand outstripping economic capacity, though not the only one. Supply-side constraints, resource shortages, or structural bottlenecks can also lead to inflation.
MMT emphasizes that taxation (P-G) is not necessary to "fund" government spending. Instead, taxation primarily serves to control inflation and create a demand for the currency. Taxation creates a value for the currency since taxes are payable only in the government's currency.
When we hold the P-G-P view of government spending, we assume it operates like a household - that a government has to collect taxes before spending and this is viewed by MMTheorists as an antiquated perspective. The misconceptions of "The government as a household" were based on the gold standard or fixed exchange rate systems, which since 1971 no longer apply.
hgomersall 43 days ago [-]
Please everyone read this comment. Any disagreements should come with relevant references showing how it's wrong.
An additional point to add is the mechanism by which taxation controls inflation. Tax serves to suppress demand in the private sector, freeing up resources that can then be bought at non-inflated prices. This is why super wealthy people are irrelevant to a sovereign government's ability to spend; their marginal propensity to consume is too low to be seriously impacted by normal levels of taxation. It's also why tax has to be broad base to be useful.
kelseyfrog 42 days ago [-]
I will provide a set of example critiques to begin.
MMT alone may not provide sufficient guidance on how to adjust outlays and receipts to manage employment and inflation.
MMT may not be politically feasible. Politicians may not be navigate politically unpopular but economical necessary.
MMT may be domestically sound, but challenging to implement regarding international trade. It may result in devaluing compared to other currencies.
MMT may suggest that interest rates can be kept low indefinitely. It's unclear if this would result in excessive risk taking.
MMT may not be applicable to developing economies.
MMT may work in the short term to manage employment and demand but fail to cultivate long term economic development.
MMT's implication as having a larger governmental impact on investment may crowd out private sector investment.
MMT if implemented could be constrained by international investors. If international investors dislike a policy, it may have domestic implications.
MMT depends on having a government effective enough to implement it. If a government is too dysfunctional, MMT may fail in practice.
hgomersall 42 days ago [-]
> MMT alone may not provide sufficient guidance on how to adjust outlays and receipts to manage employment and inflation.
The primary policy prescription of MMT is the job guarantee, which explicitly addresses the question of how to manage employment and inflation. The job guarantee defines the value of the currency, with other spend floating relative to that, whilst simultaneously providing full employment. In any case, the current model is pretty broken in which fiddling with interest rates is assumed to have a direct casual link to both (and depressingly in opposite directions).
> MMT may not be politically feasible. Politicians may not be navigate politically unpopular but economical necessary.
Insomuch as descriptive MMT is what happens in most sovereign currency areas, this is just a problem of communication. You are right that getting the politics correct is both hard and important. I'm not sure the policies will in aggregate be very unpopular though once a non-made-up description of what limits spending is understood better by the population.
> MMT may be domestically sound, but challenging to implement regarding international trade. It may result in devaluing compared to other currencies.
A floating exchange rate is a feature not a bug. Current attempts to maintain a soft peg are deeply damaging domestically for many countries. In any case, countries that are confident in their monetary and fiscal policies and that have a sound economy seem to be more robust than those that try to maintain a soft peg (see Japan).
> MMT may suggest that interest rates can be kept low indefinitely. It's unclear if this would result in excessive risk taking.
Excessive risk taking needs dealing with at the political level with actual laws and regulations. Interest rate policy is a crap tool to deal with such problems.
> MMT may not be applicable to developing economies.
Why not? It explains what their actual constraints are and the risks of taking on foreign debt or pursuing an export led growth strategy etc.
> MMT may work in the short term to manage employment and demand but fail to cultivate long term economic development.
I'm not sure what this has to do with MMT. The post war period with much higher employment and stronger government intervention had much higher growth than the following monetarist/neoliberal era, so perhaps the status quo is the problematic position.
> MMT's implication as having a larger governmental impact on investment may crowd out private sector investment.
Again, the historical evidence shows when governments stop spending, private investment collapses.
> MMT if implemented could be constrained by international investors. If international investors dislike a policy, it may have domestic implications.
What domestic implications? If you're thinking about direct foreign investment, this is problematic in its own right. It might increase domestic employment and potentially increase local skills, but it is also extractive and drains the nations' equity. This possibly has stronger implications for low income nations that don't have a good education base and well developed industries, but MMT at least makes clear where the trade-offs lie.
> MMT depends on having a government effective enough to implement it. If a government is too dysfunctional, MMT may fail in practice.
True, but then so do all political systems. MMT "failing" is also a strange concept given MMT describes the system since the fall of Bretton Woods. What's remarkable is how stable (notwithstanding the obvious "shocks") the system has been despite most governments operating as though they were still inside the Bretton Woods system.
kelseyfrog 42 days ago [-]
Thank you. I learned a lot!
VirusNewbie 42 days ago [-]
Disagreement? Literally nowhere in either of your comments did anyone actually explain how government spending is deflationary.
There is nothing to disagree with, no claims were made!
kelseyfrog 42 days ago [-]
Government spending being deflationary is not a claim MMT makes.
> and putting it towards (wasteful) government programs to "burn it" in a sense.
This claim isn't congruent with the idea of MMT.
One way to look at MMT is asking, does our government have to operate like it has a checking account, or can our economy act like an MMORPG economy?
For example, Blizzard has no obligation to collect coin before distributing coin. Blizzard thinks in terms of coin sources and coin sinks and adjusts source and sink policy in response to aggregate demand and player engagement goals.
hgomersall 42 days ago [-]
The comment was a response to burning money. What does that have to do with deflation?
VirusNewbie 42 days ago [-]
Are you seriously asking what reducing the money supply has to do with deflation?
hgomersall 42 days ago [-]
Friedman was a charlatan and monetarism was trivially debunked when he came up with it. The 60 years since have not been any more kind to it. Don't confuse stocks with flows. The whole idea of money supply as a useful metric needs to be put to bed; one would have thought the 13 years post GFC would have made that apparent.
(Of course, the Austrians have a peculiar notion that inflation can by definition only be considered as such if it's associated with increased money supply. Another reason to ignore them completely)
VirusNewbie 41 days ago [-]
Huh. So if I understand correctly, if we halved the money supply tomorrow, the price of everything would stay the same?
kelseyfrog 41 days ago [-]
How would you halve the money supply?
VirusNewbie 41 days ago [-]
it's a thought exercise. I'm asking if you think that would the consequences be?
hgomersall 41 days ago [-]
Between 2008 and 2020 M2 pretty much doubled and prices barely moved anywhere. This was intentional policy for the purpose of increasing inflation which stayed doggedly around zero. What does this tell us? Pretty much nothing because money supply is a useless measure.
What would happen if we halved it? Dunno, but to achieve that, stuff has to happen, and depending on that stuff, you might get price changes. I expect if the gov engaged in QT to achieve it, very little would happen.
VirusNewbie 41 days ago [-]
>Between 2008 and 2020 M2 pretty much doubled and prices barely moved anywhere
Except Real estate prices more than doubled. Also the Dow went from ~11k to 32k . So almost triple.
hgomersall 41 days ago [-]
And yet the price of a cabbage stayed exactly the same. Oh, we also had close to zero interest rates, might that have something to do with peoples' appetite for higher mortgages and shares over bonds?
VirusNewbie 41 days ago [-]
>Oh, we also had close to zero interest rates, might that have something to do with
YES! YES! YOU ARE CORRECT, THAT'S MY POINT. Lowering the interest rates is how you EXPAND THE MONEY SUPPLY.
hgomersall 41 days ago [-]
But that doesn't suggest that the critical variable is money supply. It just suggests there's a correlation. There are plenty of ways of increasing the money supply that does nothing at all. Pursuade the fed to give me a trillion trillion dollars and I'll show you by not spending it (though I might spend a few mil for keeping it safe, but that's not going to do much).
VirusNewbie 40 days ago [-]
If you literally buried the money then yes, you are correct but in effect that is basically destroying it.
But what would you do to not spend it? Put it in the bank? Buy bonds?
hgomersall 40 days ago [-]
The point is that lots of monetary operations are consumption neutral, including buying bonds. The only thing that actually matters from a price perspective is when a real resource gets consumed. People having more money can push the price of real goods up for sure, but the marginal propensity to consume by individuals goes down with higher relative wealth.
There's another very important effect which is the spending on things that matter induces taxation (employment taxes to deliver the thing, sales taxes etc). This is a geometric series reducing the money supply on every transaction of real goods. What matters is the flow, not the stock.
I don't think the thought exercise can exist in our reality then. Our reality requires a receipt for money supply to be halved.
somethoughts 43 days ago [-]
It'd be really interesting if you could allocate your donation to specific branches of the government (i.e. NSF, Pre-K, etc.).
sieabahlpark 43 days ago [-]
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bko 43 days ago [-]
Why is that obscene? Presumably the person created something very valuable to the world. Sure there are zero-sum ways to generate wealth (e.g. suing people, theft, front running trades) but generally that kind of wealth comes from actually generating something that people value.
FabHK 43 days ago [-]
The word “Presumably” is doing a lot of heavy lifting there. That Econ101 justification is harder and harder to keep up as you learn more about both economics and the real world.
For detailed counter arguments, see Branko Milanović Global inequality: A New Approach for the Age of Globalization, James Kwak Economism: Bad Economics and the Rise of Inequality, Walt Bogdanich & Michael Forsythe When McKinsey Comes to Town: The Hidden Influence of the World's Most Powerful Consulting Firm, and many other books.
pembrook 43 days ago [-]
[flagged]
kombookcha 43 days ago [-]
Damn, that guy is citing sources, must mean he's wrong and there is no need for you to examine any of the vibes-based assumptions you are making about the real world then.
HeyLaughingBoy 43 days ago [-]
He's not "citing sources." He's outsourcing his argument to textbooks. The point stands: if you want to refute an argument, do so yourself, possibly with reference to corroborating sources. Don't just say "you're wrong. Go read this stuff to figure out why" -- that's no way to have a discussion.
ChadNauseam 43 days ago [-]
The GP never said they were wrong because they gave sources, they said they didn't give any rebuttal at all and instead only cited sources that presumably contained a rebuttal. If they said "such and such author did a survey that found that only 5% of money held by rich people got to them via productive pursuits", that would be one thing, but they just said "such and such author says you're wrong"
pembrook 43 days ago [-]
The point is, there’s no way to evaluate if this commenter is wrong, since nobody is going to read 7 books to verify the validity of an internet comment.
It’s a classic logical fallacy; appeal to authority. There is no reason to believe any of these writers have a better understanding of how the world works than any other “authority” of the past like Karl Marx.
Just because someone says something in a book doesn’t make it true.
6stringronin 43 days ago [-]
I'm sure the value they created trickles down?
vkou 43 days ago [-]
> Presumably the person created something very valuable to the world
Or they are a rent-seeker, or a straight-up thief that sucked a lot of value out of the world. (Or one of their ancestors did, etc, etc.)
Or they robbed Peter to create value for Paul, and took a share of the difference.
These are all tried and true mechanisms for wealth generation. Without any information, you shouldn't assume that their contributions were net-positive.
HeyLaughingBoy 43 days ago [-]
Barring evidence to the contrary, some of us prefer to assume that people have good intentions.
vkou 42 days ago [-]
Here's some evidence to the contrary: Almost every family of old money has been built on one form of theft or other.
HeyLaughingBoy 42 days ago [-]
That's an assertion, not evidence.
intended 43 days ago [-]
Hasn’t it largely been finance and inheritance related, until very recently when tech joined the scene ?
Given the way everything is being made into its crappier form, it’s arguable that even tech isn’t “adding value” anymore.
cipheredStones 43 days ago [-]
The article says that he made it by stock trading. It is, at best, difficult to articulate how that could be creating value rather than capturing it. Many of the world's billionaires made their money that way.
Doing something positive-sum is a way to become a billionaire, but many people are very handsomely paid to ensure that their clients are on the good side of zero-sum transactions.
whatshisface 43 days ago [-]
Taking money away from mismanaged companies, and giving it to well-managed ones, is a net positive of stock trading. Another net positive of stock trading is making buyers and sellers available all day, for anything on the market. Yet another benefit of stock trading is to make it more difficult to manipulate the market - there's a reason why pump and dump scams only occur with assets that see very little attention (i.e. are low-volume).
cipheredStones 43 days ago [-]
> Taking money away from mismanaged companies, and giving it to well-managed ones, is a net positive of stock trading.
Where "well-managed" means "good at delivering money to its shareholders", which is at best obliquely related to a positive impact on the world. (Also, I'm skeptical that the stock price in itself makes that much of a difference to what the company is able to do.)
> Another net positive of stock trading is making buyers and sellers available all day, for anything on the market. Yet another benefit of stock trading is to make it more difficult to manipulate the market - there's a reason why pump and dump scams only occur with assets that see very little attention (i.e. are low-volume).
In other words, the benefit-to-the-world of stock trading is that it makes it easier to trade stocks? And both of these are the result of unprofitable trading as much as profitable trading, so they can't be the proof that the money comes from the value delivered!
glompers 43 days ago [-]
Not GP, but if I recall correctly, "taking money away from mismanaged companies" only occurs if the companies choose to do another issuance of shares in the future to raise equity, or stock options in the future to compensate people, in which case they would have to issue shares at a lower valuation, or issue more stock options to provide a similar benefit, than if they were a desirable company.
But stock trading also penalizes well-managed companies in slow-growing or more mature industries by giving them a higher cost-of-capital, just as it would if they were poorly managed. It seems a haphazardly blunt instrument for allocating liquidity to value generation. It piles on where rewards seem ready to be reaped, and makes it harder for mature sectors to renew or reinvent themselves.
dclowd9901 43 days ago [-]
Does the quality of management of a company actually dictate its positivity to the world at large? Seems like a quite unrelated signal.
whatshisface 43 days ago [-]
The world's not all tobacco advertising and chemical spill coverups, there are also dishonest mechanics and dirty restaurant kitchens.
CityOfThrowaway 43 days ago [-]
He did it through offering a _money management_ service to large institutions and wealthy individuals.
That money management service includes, amongst other things, picking stocks. But that's the tactical "what". The value-added element is that he preserved and grew that wealth instead. It turns out that is hard to do, and is indeed a positive sum service to customers. They get to relax _and_ make money. Great outcome.
cipheredStones 43 days ago [-]
Yes, he was capturing value for his clients, and getting paid some of that. That isn't the same thing as doing something that increases the amount of wealth in the economy, which was my point.
ipaddr 43 days ago [-]
The entire point of the stock market is to get capital to companies to allow them to do things that may increase wealth (could be local, state, country or globally). Successfully doing this means the companies he supported did well.
quesera 43 days ago [-]
> The entire point of the stock market is to get capital to companies
Only if the shares are newly-issued, though.
Usually your counterparty is just someone with different cash flow needs, or who disagrees with you about the future. No benefit accrues to the company.
FanaHOVA 43 days ago [-]
Do you really think a single individual could make $7B of profits from stock trading? They'd need to be trading $30-100B. Point72 manages $35B and has almost 3,000 people on staff.
Arch485 43 days ago [-]
Sure, but you could also toss that $30bn into SPY and make a killing.
juunpp 43 days ago [-]
Gift tax is a tax on gifts. It's not a tax that happens to be a gift.
>The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether or not the donor intends the transfer to be a gift.
43 days ago [-]
wisty 43 days ago [-]
It's not real money. They aren't holding all the gold like a dragon. Or maybe they are, but that isn't hurting anyone, it's wealth not consumption. They consume the same number of calories as a poor person. They breathe the same amount of air. Maybe they have a few extra bedrooms, but their consumption could easily be less than a millionaire.
kaibee 43 days ago [-]
Idk man, I'm pretty sure I consume a lot fewer labor hours than a billionaire with a super-yacht. The thing to focus on is how many labor-hours someone is consuming. When a billionaire allocates ~20 people of labor-hours every day to maintaining that super-yacht, that means there's ~20 people fewer labor hours for services for everyone else. And building that super-yacht also consumed a lot of high-skill labor hours.
bluGill 43 days ago [-]
That means there are 20 MORE labor hours, not less. The typical person reading this is only working a couple hours to do anything related to the basics (you don't need nearly as large a house as you live in - even if you live in a tiny house)
wisty 43 days ago [-]
As I said, it's consumption not wealth. A billionaire with a super-yacht is more obscene than a trillionaire who doesn't have one.
FredPret 43 days ago [-]
[flagged]
kinghajj 43 days ago [-]
> For the transformation of money into capital, therefore, the owner of money must find the free worker available on the commodity-market; and this worker must be free in the double sense that as a free individual he can dispose of his labour-power as his own commodity, and that, on the other hand, he has no other commodity for sale, i.e. he is rid of them, he is free of all the objects needed for the realization of his labour power.
> Why this free worker confronts him in the sphere of circulation is a question which does not interest the owner of money, for he finds the labour-market in existence as a particular branch of the commodity-market. And for the present it interests us just as little. We confine ourselves to the fact theoretically, as he does practically. One thing, however, is clear: nature does not produce on the one hand owners of money or commodities, and on the other hand men possessing nothing but their own labour-power. This relation has no basis in natural history, nor does it have a social basis common to all periods of human history, It is clearly the result of a past historical development, the product of many economic revolutions, of the extinction of a whole series of older formations of social production.
mmmpetrichor 43 days ago [-]
It's draconian to have some upper limit on wealth? what if a small number of people managed to, legally, extract wealth to the point where we all became vassals? (Or is that what we've already gone very far towards?)
FredPret 43 days ago [-]
How can you not see that it's draconian?
You may think it's no biggy since the limit will be so high.
1. First of all, when party A contracts with party B, party C (that's you) does not have a moral right to dictate an upper limit on how many times they can do that or what the terms can be as long as the transaction is legal and A and B are willing participants.
Thus, either A or B can build up an arbitrary amount of wealth and you have exactly zero to say about it. Would you have similar concerns for people who have a disproportionate number of friends, or sex partners, or hit songs, or hell, even votes?
2. If there were to be an upper limit, what is the limit? Today it's a billion dollars. What if it's 100m next, then 10m, then 1m, then 100k? What happens after a couple of decades or centuries of inflation? I suspect you don't care about this because the limit seems far out of reach to you. And so it might be - for now.
3. If there was a limit, who will decide what it should be? What are their incentives? Do you really want a jury of your peers reviewing your financials and drawing lines through it?
4. If there was a limit, who will enforce it? And how? Hand over a check or you go to prison?
There's no way to implement this without an authoritarian regime that has unlimited power over its citizens.
BurningFrog 43 days ago [-]
You don't become a vassal by someone else having a lot of wealth.
The feudal systems arose as a way to organize military defense locally in the absence of a strong central power like the Roman Empire.
defrost 43 days ago [-]
Feudal systems are better described as local organised threat of violence.
There are castle strongholds, control of choke points, a lower strata that are required to work the land and pay tithe upwards to the military heirarchy.
Feudal systems have existed in times and locations where there was little need for military defense against external forces, they persist in form as a polite, polished, chivalrous bikie club on horses, mafia with great houses.
Warrior nobility systems farm farmers.
082349872349872 43 days ago [-]
> Warrior nobility systems farm farmers
A farm is a system with many living beings, but most of the benefits accrue to those we call the farmers.
A farmer farm is a called a fief (feudum in latin), so it's no surprise that under feudalism most of the benefits accrue to those who have control over heaps of feuda.
Would it be true that under capitalism most of the benefits accrue to those who have control over heaps of capital?
[to the original point: capitalism works very well when it allows people to trade and specialise in their comparative advantages; under what conditions might it work less well?]
EDIT:
> little need for military defense against external forces
I think they were also successful even where there was need, as long as those external forces were also based on a warrior class.
What Napoleon managed was to "scale" the nature of warfare; two poorly remembered quotes from a book one of his cavalry generals wrote:
— 10 mamluks could beat 30 french, but 100 to 100 was even, and 300 french could beat 1000 mamluks
— our troopers' horsemanship was pitiful, and their officers' not much better, yet with this cavalry we made the tour of Europe
I'd say both point to innovation in the use of mass over class.
gradschoolfail 41 days ago [-]
Morally speaking, is ((profit<->negative externality) <-> (speculation<->liquidity provision)) a tautology i could get any of u curious about?
It motivates a search for the mystical beast: Marxist financier (not the pastry?)
(Not to mention elucidates the boney/HF-inspired principle of intertwining* (wrt scaling — CENDEC, decentralizing by centralizing — marxist-financing-in-itself))
Defo! (but not necessarily a tautology: there are models where it's false, it just happens to be true both for Marxists and for financiers — or have we some axioms which would make these models inconsistent?)
[the distinction between ownership and benefit in both code and common law jurisdictions has its roots in roman law, but unless either of you are really interested I'm not going to delve in that graveyard]
EDIT: HF? Our Ford?
EDIT2: for an SAP advertorial, I like TLTF! pigs acorns etc.
bawolff 43 days ago [-]
I think anti-trust laws are generally more effective at dealing with that than wealth limits. When capitalism is functioning well, what cones up must go down, and the main trick is to make sure the ultra-wealthy can't leverage their wealth to prevent anyone competiting with them.
chgs 43 days ago [-]
What goes up accumulates and is effectively removed from circulation, allowing money to be printed at a minion level while still struggling to avoid deflation.
xpe 43 days ago [-]
> When capitalism is functioning well, ...
I recommend this question as an interesting conversation starter at parties: Is it in the self-interest of the most successful capitalists to have a well-functioning capitalism?
bawolff 43 days ago [-]
Obviously not. Which is why we have antitrust laws. If it was in the self-interest of the most succesful capitalists, we wouldn't have to have laws about it.
xpe 43 days ago [-]
Right. Phrasing it as a question and waiting for the gears to turn can be a good strategy.
bawolff 43 days ago [-]
I still don't really understand your point. I don't think anyone disagrees that monopolies and other anticompetitive behaviour is a thing that exists.
xpe 40 days ago [-]
> I don't think anyone disagrees that monopolies and other anticompetitive behaviour is a thing that exists.
There are people who never learned this or have essentially forgotten it. Some ideologies bury such truths.
Among business/tech circles, there is a fairly common disdain of regulation. People can conveniently forget that self-interest taken too far can destroy the conditions that make competition work.
It is one thing to criticize a powerful monopoly that isn’t you. It is another thing to say “Oh. Maybe what I’m doing is part of the problem.”
AdrianB1 43 days ago [-]
No. But it is a slippery slope of having limits on people, from wealth to anything you can think of (random example: limit ownership to a single car). In the end if it is all legal, it is nobody else's business. If it is illegal, setting an upper limit is not the moral solution.
recursive 43 days ago [-]
> If it is illegal, setting an upper limit is not the moral solution.
Any particular reason you believe that?
AdrianB1 42 days ago [-]
Yes, if something is illegal then you don't need to set limits, you send people to prison, don't pass Go, don't collect $200.
sieabahlpark 43 days ago [-]
[dead]
fragmede 43 days ago [-]
Where $1 billion is about 40,000 Honda Civics, I think most people would support limiting ownership of cars to 39,999. It doesn't even have to be a hard limit, just a luxury tax on cars that cost more than, say, $1 million, and on owning more than 40,000 cars. If you want a 40,001st car, your can do it but it means you're going to have to pay an extra fee that goes towards helping people with less.
AdrianB1 43 days ago [-]
"most people would support" is mob rule or tyranny of the majority. Not morally right. People have no right to tell you how many cars (or something else) you are allowed to own.
fragmede 42 days ago [-]
how many slaves do you own, how much cocaine do you own, how many guns do you own? how many crocodiles or tigers can I keep as a pet? there are lots of limits on what I can own
FredPret 43 days ago [-]
Who cares what “most people would support”?
It’s right, or it isn’t.
mxkopy 43 days ago [-]
You can make just about anything a slippery slope if you wanted to - “they’re putting limits on guns, what’s next, kitchen knives?”
Morally you should probably be spending more time figuring out how to get everyone their first car instead of worrying about your legal rights in owning your second.
AdrianB1 43 days ago [-]
That is not even an argument. "shall not be infringed" means you cannot put the first limit, no concerns about more limits.
FredPret 43 days ago [-]
Why yes, there are countries with limits on kitchen knives.
And if your focus is on providing that first car, then the system currently doing that en masse for billions of previously-poor people is called “capitalism” and your moral imperative is to speed it up, not slow it down.
mxkopy 43 days ago [-]
Capitalism only works when you have a middle class. Protecting billionaires’ abilities to hoard wealth is not in the interests of the middle class.
To be charitable I’ll point out that in general that’s not what you’re arguing for. There is a real sense in which personal freedom is essential to people making it out of poverty. Protecting one person’s and not another’s would defeat the point.
Here is the compromise. It should be easy for people to do things that billionaires would have no point doing (i.e. take out a business loan of $10K) and difficult for billionaires to do things that people would have difficulty doing (hoard the global supply of some good). That’s if your goal is to have an equitable society where everyone is on the same difficulty level, more or less.
Approached this way there would not be a slippery slope because the delineation is quite clear. Moreover there’s no squashing of personal freedom, a billionaire is always free to do things a regular person is able to do. In fact the system we have now basically squashes the freedom of the average person because they are not free to do things (buy a house, have a chance in court) by virtue of not having money while other people have a ton.
AdrianB1 43 days ago [-]
"Capitalism only works when you have a middle class" - I never saw a scientific demonstration of this. It is always in the "everyone knows" fallacy class of statements pulled out of the landing gear.
mxkopy 42 days ago [-]
Ok, argue for a smaller middle class all you want
43 days ago [-]
amatecha 43 days ago [-]
Right? What's with all the volunteer billionaire-wealth advocates?
AuryGlenz 43 days ago [-]
Just because something won’t affect people doesn’t mean they can’t be allowed to think it’s morally wrong.
fragmede 43 days ago [-]
well, see, it's embarrassing to admit, but you see, I'm a billionaire. I mean, I'm not one right now, it's a temporary thing. Once I'm back on my feet, I'll have a billion dollars and then, see, I just couldn't have restrictions like that placed on me. I think everyone should be able to get that. So even though it's hurting me now that the rich don't get taxed more, it's just this temporary embarrassing thing where I'm not currently a billionaire.
komali2 43 days ago [-]
"Mutual" implies lack of coercion, which doesn't exist under capitalism, since the ownership class leverages significantly greater political power than the working class.
BriggyDwiggs42 43 days ago [-]
“Draconian”
HauntedDrum 43 days ago [-]
lol, please elaborate
mystified5016 43 days ago [-]
[flagged]
nomdep 43 days ago [-]
[flagged]
yughnior 43 days ago [-]
Peak HN. (I feel comfortable saying that considering the link to a pg article and “you are in the wrong forum”)
In the face of calling out someone else’s ignorance by saying we are all ignorant then going on to assume the thing you like is wonderful while assuming the thing you hate is terrible.
Classic. PG would be proud.
nomdep 43 days ago [-]
> Classic. PG would be proud.
That’s bad?
juunpp 43 days ago [-]
[flagged]
nomdep 43 days ago [-]
Wow, at the very top? I'd imagined I would be in the middle at most
juunpp 43 days ago [-]
The link you shared is kind of deranged. I get where it comes from, but if that is basically your world view, a little getting out wouldn't hurt you.
taylorius 43 days ago [-]
So it was a death-duty style tax - that makes more sense. For a minute I was imagining a lawyer reading a will. "And lastly, I leave my entire 7 billion dollar fortune to... the U.S. Government."
jldugger 43 days ago [-]
Well, the article leaves open the possibility that it was Musk paying the gift tax now to avoid paying an even larger estate tax later.
disillusioned 43 days ago [-]
One of the funny takeaways here is: there are so many more billionaires out there, who spend considerable effort to remain off these lists and otherwise anonymous. I work with one, and he's not on ANY of the Forbes or Bloomberg lists, though articles about his projects and investments obviously make the news. That's, as the article alludes to, the funny thing about private equity: it does a very good job _staying_ private.
cheema33 43 days ago [-]
And then there are those who try very hard to get on the list. I know at least one famous one.
43 days ago [-]
whatshisface 43 days ago [-]
Does the IRS know?
kortilla 43 days ago [-]
The IRS doesn’t track assets, so unlikely. They don’t really even know how wealthy small business owners are
ramzez 43 days ago [-]
but they track assets of common people especially overseas like FATCA
kortilla 42 days ago [-]
Not common people in the US. FATCA is really the only exemption and that’s quite uncommon.
drexlspivey 43 days ago [-]
This $7B is enough to fund the US Federal government for about 8 hours
lovich 43 days ago [-]
A single person funding a government for >330 million people even for only 8 hours is pretty impressive.
Gives off malcador holding the golden throne for a short time energy
cmplxconjugate 42 days ago [-]
I have a sudden new appreciation for the Lincoln Memorial.
acchow 43 days ago [-]
Or less than 2.5 days of interest payments on the federal debt
EricE 43 days ago [-]
Yes, what a colossal waste - would have been much better going to charities.
ricardobeat 43 days ago [-]
Choose your charities wisely. The average is something like 66% of funds going to the actual cause, and it varies wildly between 10% and 95%+.
bluGill 43 days ago [-]
There is value in those other things. Administration is an important job - while it is justifiably looked down on because it is easy to bloat, there are important things that need to be done. And those administrators really should have comfortable chairs, motorized standing desks (yes both!), coffee, and other those other little things that make life in an office better.
edm0nd 43 days ago [-]
On the flipside, imagine if they gave $7B to an anti-government group or militia to perform a coup or attack another country...
That could buy a ton of arms and equipment and likely enough funds to be successful depending upon what the ultimate goal was.
yieldcrv 43 days ago [-]
I hope this is educational for people, indeed the forbes rich list is inaccurate and there is no way to know how much anyone is worth, with just 5 minutes of planning it all goes opaque if you so desire
Although there is the aspect of the immigrant being grateful for American opportunities, its far more likely that Fayez Sarofim didn’t expect to die and had these naked assets outside of the trusts and nonprofits. Since he also had trusts and nonprofits.
BobAliceInATree 43 days ago [-]
He was 93 when he died. I think he knew his time was coming soon.
bluGill 43 days ago [-]
I have no idea what his situation was. Some people do live to over 100 so it is entirely possible that he expected another 10 years and then died in is sleep (as happened to someone else I know who died at 63). If you get a terminal cancer diagnosis you might know you have 6 months or a year, but many people don't get that much of a clue (I know one person who was down to 2 weeks when unexpectedly his body fought off the cancer and he lived many years after)
manquer 43 days ago [-]
inaccurate or incomplete ?
The latter is to be expected. Forbes only covers certain type of wealthy people for logistical if not also political reasons.
It does not cover powerful people who control enormous wealth but ownership maybe murky what is personal wealth and what is state owned, royal families or dictators like Putin or Kim Jong Un or their extended family will never make the list.
Beyond those kind of people, the murky and opaque ways that money can hidden also means it is hard to track estates that did not come from publicly made fortunes (ex: from listed company etc) that can be somewhat easily tracked.
Even when public like Bitcoin and crypto, Nakomoto 's estimated ~1.1M bitcoins is worth $70B today, nobody knows who he is. There haven't been any transfers from those addresses, however that doesn't mean a part of that enormous fortune is outside the bitcoin ecosystem as real money, the owner of the wallet could be using them as security for large loans like Elon (or other rich people typically do ) does with their stock without actually selling it to minimize tax.
chgs 43 days ago [-]
On the other hand perhaps the keys to that 70B have been lost, in which case bitcoin has deflated even more than expected.
yieldcrv 43 days ago [-]
ok but yes inaccurate was the accurate word choice
I wasnt talking state actors and unlinked crypto fortunes
Just wealth from opaque sources and opaque vehicles
All limited partners in Venture/Hedge/PE funds are opaque for example
shusaku 43 days ago [-]
> There are many complexities, but one popular technique is to put assets into trusts that allow the returns to accrue for heirs without taxation. Nike founder Phil Knight, for example, put his company’s stock in a series of trusts to benefit his children. The trusts pay him a modest return, but the rest of the gains avoid incurring estate tax, including Nike shares that were worth $6.1 billion in 2021, Bloomberg reported.
…
> Behn’s clients typically want to maximize the money they leave for their children or establish a philanthropic legacy; some seek to do both.
I’m sure that the numbers on these schemes work out favorably on paper, but if you lived through WW2 I wonder if you might be willing to pay a premium to give your immediate heirs maximum flexibility, knowing that the future is unpredictable.
42 days ago [-]
ip26 43 days ago [-]
What are the odds of something like WWII though, compared to the odds it’s all spent by the second generation?
aprilthird2021 43 days ago [-]
Normally you'd be right, but we are eerily close to a WWIII right now...
paxys 42 days ago [-]
We have been "eerily close" to WWIII since the day WWII ended. There's nothing really special about today's situation.
aprilthird2021 42 days ago [-]
The situation now is much worse than before COVID. That much is obvious. There are two major wars involving developed nations which were not happening then
HaZeust 42 days ago [-]
The fun thing about this war-mongering doom and gloom sentiment is that neither of you are right, yet.
That said, 2 developed nations are at war, and a NATO nation is being substantially threatened.
My takeaway: Forbes rich list amounts are basically fictional. Do you think they are devoting the kind of resources it would take to unravel each billionaire's finances? Clearly not. If it's mostly large sharehioldings they might be in the ballpark in some obvious cases.
seb1204 43 days ago [-]
How about the rich list is just a list of rich people that also desire others to know of their riches.
daedrdev 43 days ago [-]
Probably more that it's easier to figure out wealth from public stocks compared to private businesses and real estate.
umeshunni 43 days ago [-]
Famously, there was the Saudi billionaire who would pump up the price of his stocks in the months prior to when they published the rich list.
fakedang 43 days ago [-]
Al Waleed bin Talal. Shrewd businessman, but also one of the most fragile egos out there.
1oooqooq 43 days ago [-]
forbes sell entertainment. their clients are not even who read it, but advertisers who but advertisement.
readers and space for ads on the magazine pages are both called inventory in the biz.
JALTU 43 days ago [-]
A legit biz, I mean, look at everyone reading and commenting here! :)
1oooqooq 42 days ago [-]
this is also a publisher so yes, you're correct, fellow inventory item.
sneak 43 days ago [-]
This amount will be sufficient to operate the US military for just under four days.
chgs 43 days ago [-]
How much of that would be spent directly on wages for people working for eh US military and how much sent to external firms?
On the other hand how much is sent to external firms where most of their expenditure is in the US and thus comes back rather swiftly in taxes, and how much is siphoned off to overseas stores of wealth.
triceratops 43 days ago [-]
Genuinely impressive. This guy's tax bill alone could operate the most powerful military that has ever existed for the better part of a week.
paxys 42 days ago [-]
You could conquer a sizable chunk of land in 4 days with the US military at your disposal. Not a bad ROI for $7B.
42 days ago [-]
deepsun 42 days ago [-]
One thing not discussed: Accumulated Earnings Tax. 20%
It forces companies to distribute gains to shareholders, not amass it.
It already exists, we just don't enforce it enough.
jonny_eh 43 days ago [-]
Can someone fix this grammar?
> The data wasn’t erroneous, Treasury officials found, who are legally forbidden to discuss tax filings.
shruggedatlas 42 days ago [-]
It seems awkward because removing the parenthical expression between the commas leaves a broken sentence:
"The data wasn't erroneous|who are legally forbidden to discuss tax filings."
The best correction would be something like:
"Treasury officials, who are legally forbidden to discuss tax filings, found the data wasn't erroneous."
HaZeust 42 days ago [-]
Wouldn't it be something like:
"Treasury officials found that the data wasn’t erroneous, though they are legally forbidden to discuss tax filings."
The problem with the original text was that the rule that the officials had was said BEFORE the main point about what they found - which is why the "officials" were brought up in the first place.
This one states the important part of what they found, and then gave the addendum that they have a rule that adds a conditional to the nature of sharing the finding.
English is weird, by the way.
ianwehba 43 days ago [-]
> Some tax attorneys I spoke with theorized that the $7 billion payment was in fact a gift tax paid as part of an estate-planning strategy designed to avoid an even larger payment down the road, a strategy they expect to be common ahead of the Trump tax expiration.
1024core 43 days ago [-]
> Last year, observers with the economic equivalent of a radio telescope detected a radiating anomaly on the February 28, 2023, daily balance sheet of the US Treasury Department: a $7 billion estate- and gift-tax payment.
I'm sure their is a hidden joke about interest payments for the federal debt. Wonder what the gov will do with the cash they found in the couch.
danm 43 days ago [-]
Maybe a consumption tax with broad exemptions for necessary goods like food, clothing, shelter, etc would be a nice way of dealing with the issues people seem to have with others having wealth.
Billionaire heirs use the inheritance to buy a yacht, big tax bill, mostly use the inheritance to continue funding things that are generally good for society, smaller tax bill.
morpheuskafka 43 days ago [-]
I don't care if a rich person buys a yacht or not, it's their money and after they've paid the tax they can do whatever they want. The wealthier you are you should pay more tax regardless of how you use the money. Consumption taxes just make it harder for regular people to afford things they want; the wealthy won't care that a luxury bag with 1000% profit margin has an extra 10% tax on top.
There's already exemptions for both income and estate tax for donations to charities or governments to benefit society. It's possible to set up a private foundation, with some additional guardrails to prevent abuse, if you want to give the money directly to people that need it.
HeyLaughingBoy 43 days ago [-]
Maybe those people should just get over themselves?
jmpeax 43 days ago [-]
What does being rich even mean? For us it might be the total sum of shares, realestate, cash, minus debts. If you're hiding your wealth then what does it mean to "have" that wealth if no one knows it belongs to you? I guess it comes down to the wealth you can control in your favour, but then how is that different to being in congress?
ChainOfFools 43 days ago [-]
Wealth is a proxy for having options, even if you do not exercise them. There are thus many forms of wealth, and some do not translate directly across domain boundaries.
Arnold Schwarzenegger famously explained that he remains committed to a demanding bodybuilding regimen even long after becoming fabulously wealthy precisely because his physique is a form of wealth that cannot be bought at any price, and is available to almost anyone who wants it badly enough. A billionaire facing an acute and aggressive terminal cancer diagnosis has all the options anyone could want, but one.
dools 43 days ago [-]
> but then how is that different to being in congress?
Less work, less risk, the ability to corruptly influence multiple people in congress by proxy rather than scrounging around for funds from corrupt private individuals out to influence policy in their favour.
xpe 43 days ago [-]
Yes, there are many forms of power. Different forms are sometimes fungible to various degrees (varying across time and space). I would expect that financial wealth is the most fungible form of any of them under usual circumstances.
chubot 43 days ago [-]
I don’t really understand the question, because based on the details in the article, SOME people knew he was wealthy, but he wasn’t a public figure
Most people aren’t public figures, wealthy or not
He had a job, a bunch of kids, multiple wives, and a 250 M divorce, among other things.
Obviously some people knew this. It just wasn’t in the public interest, like 99.99999% of things that have ever happened :-)
TacticalCoder 43 days ago [-]
> What does being rich even mean?
To me it means living in a country where the government's debt ain't more than 30% of the country's GDP. So I moved to such a country.
MobiusHorizons 43 days ago [-]
Obviously moving countries will change lots of things about your life. Do you attribute any of those changes to low government debt? I have personally always thought about it as more of a long term problem rather than a present day issue. Would be curious to hear your reflections.
_bin_ 43 days ago [-]
The reference to Piketty with its implication that Sarofim represents some hidden class of billionaires is particularly annoying. He was prolific in Houston's social business scene for decades and married the Brown heiress, who was similarly known (along with her father). He threw some of the best Christmas parties and wasn't exactly a recluse, so I see relatively little reason to connect him to that idea. His son Christopher is very similar. He was worth upwards of the author's estimate but a generally good guy who doesn't really deserve the "evil billionaire" label which the author quietly assigns.
CatWChainsaw 43 days ago [-]
Read Moneyland, get mad.
aster0id 42 days ago [-]
The more I learn about the world the more I learn that I don't have any control over much of what will happen to it, and by extension to me.
So my choice is to live my life and enjoy it as much as I can.
ksec 43 days ago [-]
This may be off-topic.
>Billionaires are like black holes. We deduce their existence from the fundamental laws of capitalism, see their gravity pull politics into their orbit, even detect signals of their existence in the public markets.
I dont know about others. This is very beautifully put. But I am wondering if anyone has an counter argument. Because this basically means money > power;
> "As gravity pulls politics into their orbit."
It may be true in US or other democratic nations. It certainly isn't true in Russia or China. If what was described was fundamental laws of capitalism, Could we argue those nations where power is greater than money are not capitalism?
If so, what is the opposing force against the laws of capitalism? And are there anything in physics such as opposing force of the laws of gravity? Without going into Space Time?
whatshisface 43 days ago [-]
The pull of oligarchs is more real in Russia than anywhere else in the world.
cheema33 43 days ago [-]
> The pull of oligarchs is more real in Russia than anywhere else in the world.
It may have been true at some point. But, Putin put an end to it. He killed oligarchs when they fell out of line. There are some ex-oligarchs living outside of Russia, no longer super rich, after Putin took away their wealth.
ryandvm 43 days ago [-]
The more money you allow into politics, the more politics becomes about money.
ksec 43 days ago [-]
Thank You !
fallingknife 43 days ago [-]
There is no counter argument because you haven't even made an argument to counter. It's just the same tired old "government is in the pocket of billionaires" canard that people who don't know how anything actually works throw out without ever actually providing any evidence of it.
TacticalCoder 43 days ago [-]
> But I am wondering if anyone has an counter argument.
Confiscating all the US billionaires' wealth wouldn't even lower the US's debt by 20%.
France's public spending is 60% of the GDP, the situation in France is totally catastrophic (6% deficit atm) and... We should listen to Piketty because he's only ever worked public jobs and... He's french? And came up with an ultra-simplistic formula using bogus data?
I mean... If Piketty says it, obviously government spending representing 60% of the GDP ain't enough. Let's make it 100% and called it a planned economy. Because we saw a lot of fully functioning communist societies on earth?
Ponder this.
cycomanic 43 days ago [-]
what a weird argument.
> Confiscating all the US billionaires' wealth wouldn't even lower the US's debt by 20%.
so in other word confiscating the wealth of < 1000 people would reduce the US (a nation of ~300 M people) debt by nearly 20%. In other words we could significantly reduce the budget (much less interest payments) by taking away the wealth of ~0.0003% of the population. That seems like a no-brainer in terms of policies (the government makes decisions that takes peoples wealth away every day).
olalonde 43 days ago [-]
And guess who's going to renounce to US citizenship and/or start companies outside the US after that? Are entrepreneurs still going to immigrate to the US knowing that their wealth will be confiscated once they become successful? Who is going to fund the startups? etc.
If the US were to implement such measures, get ready for an exodus of talent and capital.
adamisom 43 days ago [-]
a "no-brainer"? for a one-time reduction? that severely damages America's ability to generate wealth? am I taking crazy pills today? I advise you to compare America's GDP per capita and especially disposable income per capita to any other country. wealth generation matters so much more than distribution.
triceratops 43 days ago [-]
> that severely damages America's ability to generate wealth?
Why would it damage that ability? The assets those billionaires own aren't going away. The skills of the people working at those businesses aren't going away.
Nasrudith 42 days ago [-]
Because dealing with someone who has proven willing to steal is bad for business. We've seen this happen again and again with communists who think they are oh so clever for 'nationalizing' their business to collect all the profits. They inevitably then find their actions effectively self-embargoed as other businesses avoid them like plague-ridden cannibals because that is what they are. Why show up to trade if there is a good chance they'll just seize all of your goods?
hollerith 43 days ago [-]
Yes, and after we confiscate their assets, we turn them into delicious meat pies. Surely this is not unethical because each billionaire, turned into meat pies, will feed many dozens of us.
ksec 43 days ago [-]
I was having this discussions the other day where my boss thinks these wiki list and Forbes list are some sort of ground truth.
The Forbes list only include people who Forbes want it to be listed and / or are public record. For example Michael Bloomberg is included but he is not even on the Bloomberg billionaires list, simply because Forbes want to expose him. And there were plenty of Billionaires in China who wasn't listed before lots of information becomes public. And I would imagine the same for Brazil, India or lots of other countries.
These list can only include people by their stock market cap or worth. It doesn't include people who are in the property market and basically own or operate via private equity. And there are plenty of billionaires in the property market. Along with many other asset that we dont even know or aware.
Another thing, if a person with $10B net worth of stock for 25 years, and the stock has been paying 3% dividends per year. You will still see him listed as $10B net worth. In reality he has $10B of dividends already. ( Although in US I think dividends are taxed ). And that is excluding any investment he made with those dividends and operate completely in the dark.
Basically because the ultra wealth are so opaque I argue that inequality is actually much wider than we thought or what we could calculate.
BobAliceInATree 43 days ago [-]
I've always thought based on the number of $10+MM condos in NYC that sit unoccupied (i.e. 2nd or 3rd or more homes), that there must be an order of magnitude more billionaires out there than we know about, and this certainly gives credence to that.
jmpman 43 days ago [-]
This is the most frustrating news I’ve read about taxes. As an American, I’d like to think that our tax system was designed to be fair. Yes, Warren Buffet’s secretary famously paid a higher tax percentage than he did, because all of his wealth was in unrealized gains. I’d accepted that - with the understanding that upon Warren’s death, estate taxes would be paid, and “fairness” would be restored to the system. But, lobbying for tax loopholes, wealth left to charities where heirs are awarded outrageous management fees, etc are ways for the extremely wealthy to avoid ever paying these estate taxes. When I heard the democrats push for a billionaire tax, I was quite cynical, as I thought the fairness issue would be resolved through estate taxes. This $7B being an anomaly, suggests that the wealthy are engineering their way around paying these estate taxes. I thought those problems were limited to “step-up” in cost basis type of giveaways to the wealthy. Now I’m reading that even the basic estate taxes aren’t being paid. I’m livid. Hate to say this, but I may now support the democrats plan. It’s a horrible plan, but apparently estate taxes aren’t working either.
HeyLaughingBoy 43 days ago [-]
> I’d like to think that our tax system was designed to be fair
It is. But everyone has a different definition of "fair."
jmpman 42 days ago [-]
Building a business empire your entire life, taking loans against that business, having step up cost basis upon death, leaving everything to your heirs - without estate taxes - isn’t “fair”
ExoticPearTree 42 days ago [-]
Fair would be if everyone would pay a the same percentage on their income, no more brackets. And it should be no more than 10-15% of gross income. That's it. No estate taxe, no inheritance tax, no nothing tax.
I am pretty sure that those 10-15% are more than enough to have a functioning government that is able to serve the public pretty well.
jmpman 42 days ago [-]
Ah yes, the libertarian’s dream. I have a different view of fair - no taxes, except for estate tax of 100%. That’s “more” fair. Equalizes society.
ExoticPearTree 42 days ago [-]
Right, the old eat the rich mantra, eh?
jmpman 39 days ago [-]
What makes trust fund children more deserving of resources than anyone else? When these estate taxes are avoided, yes, illegitimately through lobbying, then the rest of society shoulders their burden. The difference between a trust fund baby and a welfare mother is just which bank account is sending money to them.
I’m not suggesting to eat the rich. Far from it. I’m suggesting to leave the hard working rich alone, and tax them at the end of life. Their children are no more deserving of their riches than anyone else.
43 days ago [-]
kouru225 43 days ago [-]
If the US was really capitalist it would publish the wealth leaderboards for everyone to see
bluGill 43 days ago [-]
You can't really do that because there is no way to know how much someone is worth. What is my house worth - there is no answer until I sell it. You know what it last sold for, but you have no idea if I fixed it up since then so it is worth more; or maybe I was cooking meth and now it is a toxic waste site with negative value. A house is simple to value compared to a business. A yacht is another asset that is really hard to value.
For public stocks we can at least calculate value with computers, but for some that is a minority of value. In 1960 the DOW was used because it is only 30 stocks so you can add the values up every few minutes - the S&P 500 could only be calculated at the end of the day as by the time you got the value of the last stock the value of the first had changed.
hardtke 43 days ago [-]
Estate tax valuations of assets should be made public, particularly the taxed value of professional sports franchises. We know that NFL teams are worth $6+ billion dollars, and seeing the billionaire owner families pay tax on 1/10th of that might infuriate voters enough to demand reform.
rKarpinski 43 days ago [-]
Elon Musk or another person pre-paying some of their future estate tax, don't buy the other angle.
dh2022 43 days ago [-]
The author certainly makes this a plausible explanation. And yet I am thinking- if this is indeed the case, why we did not see similar payments this size more often?
rKarpinski 43 days ago [-]
Tax avoidance strategies aren't exactly advertised so it could be a novel tactic; and it probably would require an absurd liquid net worth to be worth pursuing (it might even preclude Texas billionaires like Michael Dell or Christy Walton)
morpheuskafka 43 days ago [-]
Surprisingly some people are apparently advertising tax advoidance strategies, which is why the IRS has the authority to regulate "promoters" of certain schemes, such as a recently popular one where unuseful land is donated to conservation to generate a large deduction.
Slava_Propanei 43 days ago [-]
[dead]
43 days ago [-]
iJohnDoe 43 days ago [-]
[flagged]
seb1204 43 days ago [-]
Thanks ChatGPT.
renewiltord 43 days ago [-]
Summarizing it to say it was Fayez Sarofim was useful to me.
iJohnDoe 43 days ago [-]
Agreed, it was useful explaining what the article was getting at. It was written in such a way to be less than straightforward. Also, explaining the estate-tax and significance was helpful. The title indicating $7b was left to the US is accurate, but disingenuous.
That’s fine. Ideally, people keep posting them and they keep getting flagged and I can still see them and thank them haha.
FactKnower69 43 days ago [-]
>people with an estate that is taxable — worth more than $13.6 million, or $27.2 million for a married couple
the regulatory capture on display in the USA is absolutely pathetic hahaha
cfraenkel 43 days ago [-]
Interesting enough read, but the post title is misleading. It was hardly a gift, it was an estate tax payment.
Not everyone is a greedy narcissist only out for themselves!
Danieru 43 days ago [-]
Left does not mean gift, it's a common term which applies when politely referring to the a recipient of an inheritance.
bombcar 43 days ago [-]
Left means a gift via inheritance, which is the exact opposite of an estate tax (it's not a gift or via inheritance, it's a tax on the value of an estate and paid before distribution).
s1artibartfast 43 days ago [-]
They could have squandered the money or given it away.
They could could have blown it on building a pyramid to house their corpse.
The government is not entitled to the assets.
chgs 43 days ago [-]
They aren’t entitled to their assets. They only have worth because of civilisation. How well do you think bill gates would survive in a mad max utopia that Randians fantasize about?
elzbardico 43 days ago [-]
Given the fact, as stated in the article that there are a myriad of legal ways by which millionaires and billionaires can skip paying the estate tax, it could very well have been the result of an intentional decision not to evade this by some socially-conscious dying billionaire citizen.
rzzzt 43 days ago [-]
There is also a fair bit left after taxes: "Based on estimates of the average tax rate on estates, the February 2023 payment implied the death of someone possessing a fortune between $17.5 and $40 billion."
and in the 3 seconds it took to read you comment, the interest on the debt increased more than this "gift"
wahern 43 days ago [-]
It takes about 30 seconds for the US National Debt clock (https://www.usdebtclock.org/) to tick off $1 million, so almost 2.5 days to tick off $7 billion. I'd say $7 billion covers much more than 3 seconds of interest.
dylan604 43 days ago [-]
even in your "correct" math, your comment doesn't really improve the ridiculously small amount of moving of a needle that this would make
recursive 43 days ago [-]
It does improve it, by several orders of magnitude. If your point is strong enough to make without exaggerating, then use of hyperbole can only stand to distract from the point.
wahern 43 days ago [-]
I mean... so I just noticed the "US Total Interest Paid" clock. That takes about 45 seconds to tick over $1 million, so $7 billion covers ~1% of the interest payments in a year.
That seems like a sizable contribution for a single person in a country of 330 million.
dylan604 43 days ago [-]
Great, so now all we need is another 99 people with similar donations and we could cover the interest for a year. Then you need to continue to do that every year forever because you have yet to make any movement on the principle
zztop44 43 days ago [-]
Why do you care? The country has never paid back this debt, will never pay back this debt and no-one expects it to.
dylan604 43 days ago [-]
That's my point. It is ridiculous to think that $7b is anything but a drop in the bucket. While $7b is a big number to mere mortals, it is chump change in terms of national debt.
zztop44 43 days ago [-]
Oh okay, that makes sense, and I agree with you. That said, paying tax is still important for a number of reasons; and ultimately the national budget is a large bucket made up of small drops.
cycomanic 43 days ago [-]
What is your point exactly? That's sort of saying the weight of the heaviest man ever alive (>300 kg) is a drop in the bucket if we compare to the total weight of people in the US, which is true but also completely irrelevant (in fact that comparison actually makes it even clearer how out of proportion the $7B are for a single person).
dylan604 43 days ago [-]
This person is being called out as unique because they "allowed" this money to be collected rather than doing the normal thing people with this type of money do and find ways to avoid the tax.
So if you're so gung-ho positive we can make a dent in the debt, then why not make sensible comments about making changes so the tax is not so easily avoidable instead of nonsensical fat people comments
chgs 43 days ago [-]
This wasn’t a donation. This was a fee for providing a society that allows him to accumulate so much.
sushid 43 days ago [-]
"Even if I was wrong by many orders of magnitude, I'm still correct!"
I can't imagine something more useless than an estate giving money to the US federal government rather than secreting it away via legal tax loopholes and re-investments in new industry.
dweinus 43 days ago [-]
TIL that in 2024 people are still trying to claim that trickle-down economics works. Given all the wealth at the top these days, I'll expect my trickle-down check in the mail any day now.
chasd00 43 days ago [-]
Giving $7B to the gov changes zero. Not a single function of the government will change not a single thing. They should have just thrown it in the trash. At least go pay off student loans with a lottery until the money is gone or something, that could help. Maybe pay all the mortgages in a small town or something. What they did by giving it to the gov is the same as setting it on fire in the front yard. It’s kind of upsetting.
consteval 43 days ago [-]
If you take this to its logical conclusion then nobody pays taxes and then society falls apart. Clearly, that money does something.
sneak 43 days ago [-]
The logical conclusion of this line of thinking is that you must then believe there to be a moral
obligation to always pay service people in cash and avoid paying taxes at every possible opportunity.
Do I understand your position correctly?
ilammy 43 days ago [-]
Don’t put your words in their mouth.
Giving government money doesn’t really change the way government operates. The government has the budget for the year and that’s the spending for the year. If government needs something done, an item gets budgeted, money is borrowed, and paid out to get stuff done. Giving money to the government only offsets the debt; nothing else changes from that besides the number in the spreadsheet.
throwaway984393 43 days ago [-]
[dead]
IAmNotACellist 43 days ago [-]
Plus they'll have increased the deficit by $7B by the time the ink dries on the tax payment check.
randomdata 43 days ago [-]
Who claims that “trickle-down economics” works? The term was literally coined as a joke about how it doesn’t work.
IAmNotACellist 43 days ago [-]
You think investment = trickle down economics? Is your 401k trickle down economics?
chgs 43 days ago [-]
401k is a massive Ponzi scheme where people working today hope that people in the future will value their work.
Imagine a world where you had 15 billionaires and 5 people working. How much are are. Those billions worth when they are fighting each other to have one of the 5 useful people wipe their ass in their care home?
WrongAssumption 42 days ago [-]
I’m not confident you know what a 401k is.
chgs 42 days ago [-]
Like all investments it’s a hope that trading work done today will be worth work done in the future.
This only holds when supply of work is high and demand is low. If the amount of work requested in the future is higher than the supply then it doesn’t matter how many pieces of paper you have to prove that you worked in the past, you are not going to get that work done.
With a shrinking population you’re relying of productivity gains, and in areas that old people need, like personal care, there’s only limited gains to be had. If there’s only 100 hours of ass wiping being done but 200 hours demanded, then half of the people requiring that service will be disapointed.
But that’s just the general problem of timeshifting your work. You rely on the next generation to honour “the deal”.
Now the 401k specifically has other issues. It tends to be “pile money in the S&P”, which simply increases the values of those stocks regardless of their fundamental worth. Passive investments lead to bubbles and collapse.
Throw both of those together and you end up with a disaster waiting to happen.
mcmoor 43 days ago [-]
Me in developing country sure see that billionaire's wealths already trickle down to developed country's citizens.
zztop44 43 days ago [-]
How can you be sure it’s not wealth trickling up instead?
missedthecue 43 days ago [-]
I don't think you can consume your way to a higher standard of living. The only way to sustainably increase the standard of living is to increase productivity. This can only come from investment into hard capital and into human capital (education).
So to me, it would be very hard to make an argument that it trickles up. It has to come from investment. And investment in the private sector is usually done by rich people, because you need money in the first place to invest and also because investing well makes you rich.
cycomanic 43 days ago [-]
Except for the fact wages and middle class wealth has not kept up with productivity for ages in most western countries.
Also considering that the super-rich in developing nations are not that far behind the super-rich in developed nations, why hasn't their wealth trickled down and uplifted those developing nations? The reality is that developing nations have even higher wealth inequality, so refuting your argument.
missedthecue 43 days ago [-]
Wages won't ever eat up 100% of the productivity gains. That defeats the point of investing in productivity gains. If you have ten ditch diggers, but then buy a steamshovel, the operator of the steamshovel earns more than the ditch diggers, but doesn't earn 10 salaries.
I am from a developing country. There aren't a lot of super rich here. In fact there isn't much wealth at all. Having some greater gini coefficient doesn't mean you have more wealth, inequality really isn't a relevant measure.
If raising wages was the only component to development, Somalia could simply set their minimum wage to $50 an hour and watch the country soar. Wages follow development, not the other around.
mcmoor 41 days ago [-]
Actually my realization comes when seeing that super rich in developing nations don't even compare to super rich in developed nations. Like there's sky above sky. My country's elites bow to world's elites.
tastyfreeze 43 days ago [-]
Government has put up a bunch of roofs, troughs and channels to catch all the trickle. How much of your salary goes to something required by government? People making money by doing or making things other people want is not evil. Government setting up fences to protect the current winners is the problem.
iJohnDoe 43 days ago [-]
Agreed, they should have just set $7 billion on fire in the middle of the street. This is an inconsequential amount to the US gov, but a tremendous amount to schools, communities hit by devastation or other terrible events, non-profit hospitals, etc.
BobAliceInATree 43 days ago [-]
You literally listed all things that are funded by taxes (schools, FEMA, medicare/medicaid). Sigh.
iJohnDoe 43 days ago [-]
[flagged]
juunpp 43 days ago [-]
There is really a point to both opinions. BobAlice maybe lives in a place where tax funds are actually well spent.
https://old.reddit.com/r/BuyBorrowDieExplained/comments/1f26...
HN comments: https://news.ycombinator.com/item?id=41408772
And it exists in part because there are so many legitimate cases for doing it, even as a wealthy person: pretend you're a relatively successful businessman whose company has appreciated to $50mm. In this world, you can't just leave your gains unrealized and borrow against them. So you can
- Try to find somebody to sell to, which is a sketchy move. Of course, as your company continues to appreciate, you will be forced to continue reducing your ownership stake. Over time, this will make keeping a family business in the family largely impossible.
- Try to find money to pay taxes. This means less money for R&D, for expansion, for your employees.
- Just dump the whole business to private equity and move on.
These all suck, and the government generally collects money on assets as they move not assets at rest. I see no way to resolve it that isn't suckier than the status quo and so am left with the conclusion that people who agitate for such changes are more resentful of the rich than they are worried about the justice or lack thereof of tax avoidance.
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 heirs who can sell them and also never have to pay those taxes. It's like a big gift from the IRS: your assets that were previously encumbered by unpaid capital gains taxes instantly become more valuable upon your death.
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.
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.
Yes their heirs could hold the assets forever and never sell, correct.
The proposal has been floated recently that unrealized capital gains should be taxed. This would nominally mitigate a major problem with your proposal, which is that it would heavily discourage people from switching from long-held mediocre investments with a low tax basis to better investments. So they're often proposed together or as the mechanism to remove the step-up in basis, i.e. it's unconditionally stepped up to market value every year but then you have to pay the tax immediately.
But if you tax unrealized gains then you force the sale of assets any time the tax is more than the owner's liquid cash, which is its own major problem.
Whereas if you don't do this, now you haven't solved the original problem that the owner suffers a huge tax penalty for switching from a long-held mediocre investment to a better one.
Eventually, someone will sell it. And, at that point, if the tax basis stays with it, all taxes that weren't payed before are payed then. Having the tax basis transfer with the property doesn't prevent the taxes from being payed, it just (might) defer them. Having the tax basis _not_ transfer gets rid of the taxes (on the currently accrued profit) completely.
"In the long run, we are all dead." -John Maynard Keynes
"Eventually" could be a thousand years from now, or after the fall of the nation.
More to the point, compounding interest is a powerful force.
Suppose you have an asset valued at $1000 which is generating annual returns of 10%. You know of another investment that would return 11%, and also employ more people etc. If you had to immediately pay 20% of the $1000 in tax to switch to the better investment, it would take more than 20 years for the extra 1% to recover the cost, and then you might not do it. So instead you keep the original investment and in 20 years if you sell you would have (and owe tax on) ~$6700.
Whereas with a step up in basis, you could sell the investment immediately and invest the full $1000 (instead of $800) in the better investment. Then if you sell in 20 years you would have >$8000 and owe tax on >$7000. So both you and the government come out ahead when you sell in 20 years, to say nothing of the additional people you employed (and who themselves paid more taxes). Preventing that from happening is bad for everybody.
Notice also that this problem gets worse the higher you set the tax rate.
My point wasn't that "not forcing the sale won't impact taxes at all". It was more to point out that not forcing the sale doesn't magically make the taxes disappear. It just leave them unrealized in the same way they would if the original owner was still alive and owning them. They'll just get paid later.
Your post made it sound like, by not forcing the sale and taxation, those taxes are completely lost the society.
We don't really know the value of most things when a transaction isn't happening. Also, this would force people to sell things they otherwise wouldn't have merely in order to pay the tax on their value changing, which is six kinds of disaster.
And, that would imply that you would have a tax loss any time the value of something you own goes down, even if you don't sell it. Which would cause government revenue in recession years to be inverted, even though government spending in recession years is usually increased.
> It was more to point out that not forcing the sale doesn't magically make the taxes disappear. It just leave them unrealized in the same way they would if the original owner was still alive and owning them. They'll just get paid later.
They're unrealized gains. They may not ever be realized.
One of the more common ways for this to happen is for the business to eventually go under. Most of them do in the long run. What percentage of companies are over a hundred years old?
More to the point, that's exactly the problem. If you force a large tax event on sale, things get held longer than they ought to, and then (poorly) managed by someone not really interested in that line of business. Malinvestment leads to lower returns, which reduces tax revenue, often by more than the amount of the step up in basis.
In general, anything which is economically inefficient is also going to be bad for government revenue.
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 to sell it and invest in something else. Except that you won't if you'd lose a significant proportion of its value to taxes. This is a problem with capital gains taxes in general, but it's especially a problem for anything held intergenerationally (i.e. for a very long time) because not only will the appreciation be large, the inflation by itself would represent most of the value of the "gain". So the step-up in basis is a stupid hack to avoid this and let children make different choices than their parents and grandparents without being punished by the tax code.
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?
Because they only get deprived of it if they sell it, so that gives them more incentive not to sell it, but selling it may be more economically productive, and then you lose the positive externalities of the more productive investment and the tax revenue it would have generated, which could by itself plausibly be more than the loss from the step up in basis.
In general the problem is that capital gains taxes when implemented simplistically create a lot of perverse incentives (tax on productive investment is economically undesirable in general and some of the edge cases are especially ugly), and then the tax code gets full of warts that try to reduce the bad incentives/consequences instead of rethinking the structure of the tax.
> 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?
Your dead relative already paid the taxes on any money earned in the equivalent way. Capital gains are on asset appreciation, which is an industrial-sized can of worms.
I'm sure there would be hijinks to avoid this, but for the amounts in question a great deal of legal and accounting hours could be expended to audit the correctness of the returns.
Why is that obvious? Doesn't a rule like that necessarily create distortions in who gets all the benefits of civilization? For example, in only income is taxed, but not gains on investments, doesn't that mean that working people do ALL the work AND pay ALL the taxes, while people who are rich enough not to work literally do NO work and pay NO taxes?
People like you don't realize that economics involves living, breathing humans.
The estate tax already means that the estate of a person who dies may need to sell / divide / split stuff to pay the government. There already is no fundamental protection for an asset passing unscathed from a parent to a child. I don't see how not stepping up basis qualitatively changes this.
And your argument of "you want a child to be able to inherit a family business / house and keep the family business protected" is incredibly axiomatic and the antithesis of a tax. While it's inherently consistent, you're making the same general argument as "all taxes are theft".
Yes taxes may be theft in one view, but under our current society, raising revenue for the common welfare is also a virtue, so we can't have have it both ways.
Sorry for not tearing up.
I'd also point out that people's assets have gone up in nominal terms in the past few years, but for many that's not reflective of an increase in purchasing power. Much of that increase is due to excess inflation from the profligate overspending of our past two administrations, so the cycle currently looks like this: government prints money and causes inflation -> your assets are "worth more" -> taxman says "give me a piece of that" even though your real wages have fallen or have just barely recovered to pre-2020 levels. And of course, even if we index to inflation, that will necessarily hit the poor harder: food and energy are deemed "too volatile" to include in headline CPI, but as necessities, they comprise a larger part of poor households' spending and so inflation will hit them harder than the numbers suggest.
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 use it to buy something from me, I have to pay taxes on it too. That's my income now.
If my father paid taxes on something he earned that's his tax bill. When I get it, I have to pay too. That's my income now.
This is very clear and consistent. Outside of all the people with an interest in pretending otherwise.
Also worth noting that there's no state interest whatsoever in preserving generational wealth. Just none. The fact that kids have to earn their own money instead of a family coasting for generations is a good thing for the most part.
There are some plausible arguments for preserving continuity in certain cases, like community based family owned businesses, farms, that kind of thing. But everybody already agrees with that which is why those kinds of things have been generally exempt from estate taxes for generations. The people telling you otherwise are trying to trick you into caring about their agenda, which is how to not pay taxes on their substantial wealth.
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 person companies(!) - generally pay taxes on their profits, not their total income or revenue.
- an indirect tax on the vast majority of goods and services
- borne by the final consumer, not by businesses
- charged as a percentage of the sales price and collected fractionally at every stage of production and distribution
- neutral, as the tax borne by the final consumer is the same regardless of the length of the supply chain"
https://taxation-customs.ec.europa.eu/taxation/vat_en
And the final consumer of a good can also be a business, in which case VAT is still paid for that good. For example, if you buy a company car for use by your employees, you can't get back the VAT on that purchase (only if you buy a car to sell it on to someone else can you get the VAT back).
And, of course, given that consumers make purchase decisions based on the nominal price of a good, which includes the VAT, the market price of a good will depend on VAT as well. If an increase in VAT risks to push the price so high that demand decreases, companies can choose to reduce the price before tax so that the final price is low enough not to affect demand.
So, again, VAT is essentially a tax on all sales revenue a company makes. It's true that it doesn't apply to other sources of revenue.
Businesses collect it on sales to their consumers (output VAT) and offset any VAT they've paid to their suppliers (input VAT) and the balance is paid to the state.
As that taxation-customs.ec.europa.eu article states: "VAT is borne by the final consumer, not by businesses."
(Source: I've been personally registered for VAT, I've worked for companies who were registered for VAT, I've had customers who were registered for VAT).
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.
Being able to accumulate capital, at least without having to resort to extreme violence is also about as "unnatural" as it gets..
No taxes = No government = No excess (above subsistence level) accumulation of assets
(This is a genuine clarifying question, because I'm struggling here) are you suggesting that saving is somehow unnatural?
Depends on how you define saving. Hoarding perishable goods is of course a pretty natural behaviour but that only scales so much. Investment (i.e. owning more land or other productive assets than you can utilize directly yourself) seems pretty as opposed to communal ownership seems pretty "unnatural".
Not that I'm somehow implying that "natural" (whatever that really means, since using violence and coercion certainly seems like natural human behaviour) is somehow always superior to the opposite.
That's a great point.
But note that you also cannot arbitrarily jump so far back in an implied chain of premises as if to suggest that you've somehow build your own (suspiciously libertarian-leaning) argument from first principles. For example:
> The state of nature is no tax
Well, the state of nature is also tribalistic. But imagine someone making an argument that collectivizing the farm in question is right because the state of nature is humans living in a collective.
You'd rightly reject such an appeal to nature in that case. Therefore, you should reject your own appeal above.
The state of nature is no property. Billionaires can't exist without a government enforcing their property rights. Why shouldn't they pay the entity that made it possible for them to accumulate their vast wealth?
The Constitution addresses this confusion in its' preamble. The role of the government includes law and maintaining order, but it extends further -
"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
But the preamble to the constitution isn't legally binding anyway.
> But the preamble to the constitution isn't legally binding anyway.
No one said it was, but the intent of the framers, at least, is very clear - the government should do things that promote the general welfare, not merely establishing rule of law and enforcing civil order.
It implies that it isn't something the government would be separately prohibited from doing, if they were otherwise allowed to do it.
Consider how the First Amendment works. The constitution explicitly gives Congress the power "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries". But if they tried to pass a law saying that you couldn't quote a politician to demonstrate that politician's hypocrisy or mendacity as a violation of the politician's copyright in their own words, that law would be unconstitutional as a violation of the First Amendment.
A binding requirement for the government to "promote the general welfare" should likewise e.g. prohibit the government from issuing no-bid contracts to politicians' cronies for the operation of Post Offices, even though the government is explicitly authorized to operate Post Offices, because corruption doesn't promote the general welfare.
If you wanted the government to have the power to operate a healthcare system then you should have to amend the constitution to grant that power to Congress, since they didn't have it originally. Or have your socialized healthcare system(s) operated by the states.
We use taxes because nature doesn't scale to towns of 1000, much less nations of millions. But that is not the state of nature.
i.e. you can't really "own" more land than you and your family can personally farm and extract rent on it without a state to protect your claim.
If a government won’t enforce others rights to property, eventually someone is going to form a government where everyone’s things are theirs eh? Since what other option do they have if they want to own something.
Notably, the biggest thefts seem to happen when they can convince people that the gov’t is doing it for ‘the good of the people’, and they’re ‘going after the rich people’, and then they can pocket it when no one is looking.
This is a reason why we need better anti-corruption legislation, an end of the "super PAC", much higher inheritance taxes with fewer loopholes, and structural reforms to fix a profoundly corrupt Supreme Court.
Also, a lot of what you’re describing seems like regulatory capture.
The government may indeed enforce property rights in a meaningful way, but it doesn't seem like it's doing this for billionaires.
> Why shouldn't they pay the entity that made it possible for them to accumulate their vast wealth?
If this were indeed a true description of how that process occurs, why are you so comfortable with letting the government "make that possible"? Where in the Constitution (or even common law) does it grant the government this power?
No, but assuming you are on Facebook's board / in upper management you can conspire with the rest of the board to get rid of Zuckerberg (possibly permanently) and share the company amongst yourself.
ARM China seems like somewhat close example of what can happen when there is no government willing to protect property rights. e.g. as long as he has enough local support a CEO of your subsidiary could just take over the entity and there would be nothing you can do about it.
IMHO we'd end up with some dystopian form of Cyberpunk style techno feudalism without strong governments regulating everything. Which in theory might be a good thing for the corporations themselves, just not for most of the people who are currently running them.
Yes, if you want to oust him and take over as CEO, then boards of directors have that power. But that's more about his job security. When he leaves, he leaves with just as much stock as he ever had, and in the case of some termination clauses in contracts for that stuff, he walks away with more than he walked in with.
With the government out of the picture, this doesn't much change. If the board of directors tries to confiscate shares or some equivalent (I dunno, withholding dividends? Does Facebook even pay dividends?), then their stock price tanks immediately. Somewhere down near $0. Their financing falls apart shortly after that, and pretty soon the company goes under. The punishment for some group stealing Facebook isn't government goons stepping in and bashing skulls, it's in the complicated structures that make it worthless just about as soon as it's stolen.
I think your Chinese example is quite the opposite of this. The government of China basically has to step in and allow ARM China to pull such a stunt, or it's impossible.
> complicated structures
I guess. But I just don't see how could the stock market (in its current form) or most of those complicated structures exist without governments. Of course it's a silly discussion since Facebook in its current form (including corporate and ownership structure) wouldn't be a thing without all of that.
> in the complicated structures that make it worthless just about as soon as it's stolen.
Facebook is still highly profitable, arguably without any government regulation it could be even more profitable. Why share any of that value with the shareholders who can't really sue you or do anything else? Sure if you did that nobody would trust you if you started a new company and were looking for investors (which is why Facebook wouldn't exist in the first place in a system that allows that) but that doesn't really matter if the government suddenly disappeared.
Not saying that Facebook's upper management would immediately try pulling off something like that it's just seems like the natural long-term outcome. Political/social instability is usually already priced in, so FBs valuation would collapse just because something like that became an option regardless of Meta's/FB's intentions. At that point the cost of "confiscating" shares or similar shenanigans wouldn't really be that high since being in direct control of the company would be worth a whole lot more than owning some theoretical share of it.
> allow ARM China to pull such a stunt, or it's impossible.
Why? What could ARM/Softbank do if their Chinese subsidiary decided to just ignore them while continuing to use their IP. Of course their whole business model couldn't exist in the first without any way to enforce contracts since the companies actually manufacturing the chips would just steal that IP themselves.
Exactly. The entire notion of their wealth is predicated on an elaborate system of law and governance! Otherwise, it's all just freaking numbers on a computer.
You have it backwards. "imaginary ownership of gigantic corporations" doesn't exist without government. The government doesn't "protect" Zuckerbergs shares, the government is the vehicle that gives Zuckerbergs shares value. Without the government Zuckerberg's billions is worthless.
In this fairytale world where Zuckerberg is somehow made a persona non grata, then all his shares would become worthless as he wouldn't be able to sell them, nor would he be able to enforce Facebook (the entity) to do anything on his behalf.
Billionaires absolutely depend on a very robust system of laws to maintain control of the giant corporations that they own. Zuckerberg couldn't even enter a Facebook building if his employees rebelled against him and the law wasn't protecting him.
Note, I'm not trying to single out Zuck in any way, just wanted to pick some billionaire tied to a well known corporation to make the examples simpler.
huh, what natural, physical laws are being broken? collecting taxes exceeds the speed of light or goes below 0K or something?
Which inevitably leads to the question: who should get the power to do that and why they, specifically?
The answer is, some form of government protects them. And that form of government is going to want it's tribute.
This doesn't answer my question at all.
Who should decide those limits, and why they? Who pics them?
Think of a thought experiment: A new city/town/state/country is getting started (let's assume peacefully somehow, this is a thought experiment).
Who gets to set those limits on democratic action?
One choice that comes to mind is everyone gets together and pics the wisest person in the crowd = representative democracy.
Another choice is the strongest bully in the group beats everyone up and sets the laws however he likes = dictatorship.
What other choices? And which one should be best?
I wasn't trying to answer your question. I was pointing out that your question presupposes that the majority has the power to enforce its will on the minority. It doesn't even consider the possibility that the majority having that power is not a law of physics, it's a social construct, and a society does not have to adopt it.
> A new city/town/state/country is getting started (let's assume peacefully somehow, this is a thought experiment).
Who gets to set those limits on democratic action?
Again, you're assuming that what gets started is a city/town/state/country as a political entity, with the ability to enforce its will on its residents, and then asking how that power gets regulated.
You're not even considering the possibility of a community getting started without anyone having the power to enforce their will on others, with everyone having to deal with everyone else as an equal, and nobody having any "governmental" powers.
Historically, such things have happened. For example, saga period Iceland went for several centuries without anyone having governmental powers. Some of the American colonies in the late 1600s and early 1700s--Pennsylvania is a good example--had effectively no one having governmental powers, since while there was nominally a "goverment", it had no ability to enforce its will on residents. These are "other choices" that your question doesn't even comprehend.
What happened in those cases? Historically, those societies did fine as long as they were left alone. What eventually ended them was outside interference. Saga period Iceland ended up conquered by Norway. Pennsylvania ended up having its regime tightened up by the British after the French and Indian War (as part of a general tightening up on all the American colonies).
> therefore we should set constraints on what the majority can do.
The constraints are supposed to be a constitution and time. In time, as people die and new people are born, the world changes. New people are in charge. They can even rewrite the constitution.
What other alternative is there?
> I'd describe your system as closer to mob rule.
“Mob rule” is just the pejorative anti-democrats use for democracy not going their way.
What’s a rule-by-rich-people pejorative? Pig-rule? Just a pejorative. Just as meaningless.
Anti-democrats don’t have rational arguments on their side. Therefore they have to invent specters of the pitch-forked mob who is killing babies in the streets, the desperate, unwashed…
But all of that begs the question: if the “mob” rules, why are they in the streets? With pitch forks? Desperate? Of course it is completely irrational. If the “mob” already ruled there would be be no mob because the average person would enjoy dignity and respect. Safety and security.
They would have enough means to appear upstanding. Like you know, those rich people who rule now or ruled in the past. Those who never had to excuse themselves for being part of a mob or being unclean.
But it’s clear that if you want people to be desperate and in the dirt then you also don’t want them to rule. That’s how you get a mob.
lmfao this is always, always, always the refrain
> 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.
There is a problem with high taxes on earned income, but anyone complaining about the 15% capital gains tax has problems. The estate tax only applies to this who are very, very fortunate. These are not even earned. Again, if one hates his country, he can move to Dubai, Bermuda or the Glorious Sultanate of Brunei and enjoy their lifestyle.
I do understand that people in California get angry because the state is so poorly run, but 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.
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.
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.
You're doing it again. You're assuming that it must be a just tax. You're assuming that a tax is somehow intrinsically "owed", that any tax requires no justification.
You think a profit transfer has been made, because you think in terms of atomized individuals with no family.
I don't mind if people get mad when anything more than that is taxed.
They owe taxes? They can pay them. They can afford to pay them because they have inherited assets. "Oh no, they're gonna get a diminished inheritance. What a disaster." I'm not getting one, and neither are most of the people in the country. They'll still have their inheritance, they just won't have the land. And they aren't entitled to it if they don't have the money to pay their taxes.
And that's how it's done in many parts of the world, works perfectly fine. There's really no reason to step up basis except to provide that loophole, which is probably exactly the reason it's done.
We do have the odd exemptions like Clarkson's Farm which was bought partly for inheritance tax avoidance, but you don't have to do that.
I didn't say taxation is theft and would rather you didn't put words in my mouth. You're assuming I'm against any form of taxation whatsoever on a moral basis, which isn't actually true. I think there are values reasons (most of us actually like the idea of a family business staying in a family, not getting sold to private equity) and moral reasons why we should continue resetting the tax basis of inherited assets. As a compromise position, I think it would be more reasonable for you to suggest removing the stepped-up basis but not counting inheritance as a taxable event.
A family is not a single entity under any law in any country I know of. Certainly not in the USA or anywhere in Europe.
The difference is the kids have been spending estate money and have access to all the assets the estate controls. It make no sense that would change because a member of the family died.
This is a bad argument. Taxes are also money invested, in schooling, infrastructure, etc.
It's a very common fallacy of people criticizing public spending to point to the stock market and say "Look! Imagine how rich we would be if we had just invested the public spending instead." Completely falling into the trap of discarding the value growth of public investments just because they are not measured and advertised the same way.
Saying "this person's money most benefits me if I let them keep it" vs "this person's money most benefits me if it's redistributed to me" are just two frames that reveal your belief in your entitlement to others property and labor based on your belief of it's benefit to you.
Not presently. Most tax dollars are spent elsewhere and infrastructure/education get less than 7%: https://fiscaldata.treasury.gov/americas-finance-guide/feder...
Even that spending is not effective. Drive California roads and you’ll often see fixes that aren’t much better than the damaged roads they replaced. And let’s not talk about our wonderful train projects…
In theory, this money would make a lot of difference. In practice, it’s heartbreaking.
So on the one hand, very little of that is infrastructure. Mostly it seems to go on "keeping people alive".
Now sure, the govt could invest the money instead, and let a bunch of (mostly old) people die.
In our "money" equation, old people have little practical value (and there's no line in our fiscal analysis for measuring our humanity).
Which perhaps is why it's best not to evaluate returns on govt spending the way you would measure returns on personal investments.
[As a PS I'd add that all those taxes, flowing back to the old people, is flowing back into the economy, which is what keeps businesses in business, and keeps those share prices going up.]
Social security and medicare are not means-tested in any way whatsoever. In fact, they are massive welfare programs that make our budget structurally unsustainable to give money to the demographic that has had the most time to build up wealth and assets. Around one-third of all US wealth is held by Americans over seventy years old. Perhaps instead of an estate tax, we should explore having those well-off seniors use their savings and home equity instead of demanding government funds. Not to mention decades of subsidizing housing demand has drastically inflated housing prices, and younger Americans are now paying many of these retirees several times what those properties went for decades ago, an increase well in excess of inflation. In other words, through multiple channels, the young are being sucked dry by the old, despite the fact that the old hold a huge chunk of wealth.
I'd also point out old people are a terrible way to feed money back into the economy. They are generally the last people to adopt any innovation outside medicine, so increasing their share of spending draws dollars away from new innovation and towards constructing bingo halls. That has a caustic effect on our long-term economic outlook.
There will of course be the poor grandmother whom we don't want eating dog food. I doubt anyone disagrees with you on that. Let's just not pretend all of them need the checks they presently receive.
You are free to leave. There are plenty of low-tax countries. If you want to live in the US, Europe, Japan,..., then you must pay to be part of our reindeer games.
That said, PLEASE get involved and try to direct public funding and attention towards core activities (roads, schools, infrastructure) instead of ever more ridiculous programs to employ Berkeley graduates in virtuous-looking jobs. Utah does a great job at this sort of thing. Instead of learning from them, our political elite degrade them and insult them for their religious beliefs. I once repeated a colleague's obscene jokes, only I stated that he said them about Muslims instead of Mormons. He lost his mind trying to correct me. It was amusing.
In Canada, assets are deemed to have been disposed of upon death (or gifting) so the estate pays capital gains taxes on the accrued profit. There are a few exemptions for political reasons, e.g. to allow farmers to pass appreciated farm property to their children tax free, but they're sufficiently limited that they don't cost very much.
Seems like an obvious fix to me -- when the cost basis is stepped up, taxes are due -- and in practice it seems to work pretty well.
If the concern is how much the policy costs the nation, then I don't think that's a sufficient reason to change things either. The top 1% in America hold about 31% of a total $140 trillion, or $43 trillion. This is, in a very optimistic case, around twenty years worth of the current federal deficit. Given the trajectory it's taken over my entire lifetime I find it unlikely it would last more than a decade. If the concern is cost, we have a "money out" problem in the US, not a "money in" one, largely driven by our ballooning mandatory spending (much of which goes to a radically outsized group of old people, whose entitlements neither party will touch despite their outsized ownership of wealth) and the high interest expense that's caused. Even if we outright confiscated every dollar of the 1%'s net worth, that wouldn't represent a remotely sustainable solution. Hence my comment about most of these policies looking more like schadenfreude than a sincere desire to fix things.
In the "family farm" (and "family business") scenario, we're talking about private companies -- whether incorporated or not, all the owners are related. If part of such a company needs to be sold off to pay taxes, it would presumably be sold to a someone at arm's length, which would fundamentally change the business structure -- just like running a startup with VC investors is different from running a bootstrapped startup.
There's not many plausible routes to "paying the millions-dollar death tax so that developers don't turn the cornfield into a suburb" in such scenarios. Mostly moot though, this all played out and was over before most of us were born. I suppose there are gigantic 20,000 operations that "won't stay in the family"... but those farmers:
1. Aren't really living on the same piece of land that they farm
2. Having to sell off 1500 acres to pay the tax bill doesn't much affect their operation except that it's slightly smaller
3. Have someone custom combine it anyway... they're basically a management company that hires a bunch of contractors
4. Generally are incorporated in such a way that sole ownership hasn't been an issue since great-great-granpa died back in 1961
Family farms are, at this point, largely mythological.
1. Continue operations of the family farm, assuming you can come up with the money to cover taxes.
2. Sell the farm to Big Farm, Inc., get a $5M check and forget about it, regardless of the consequences that means to your customers.
Inheritance, even with normal tax, is a cheap way of keeping money in the family and keeping rich people rich. It is not based on merit, capabilities or need and serves no purpose in a society based on improving the lives of the entire population. (Which you can argue is not what [country with low inheritance tax] is)
I would say that society is served well by the ability of widows to inherit and not be left destitute. Similarly for minor children.
If you're talking specifically about inheritance by adult children, I agree the arguments in favour are weaker.
If you have $300 to your name, you're not getting finance. The bank will just laugh you out the door.
- The first year it has 10k€ ARR.
- So it is worth 100k€. You must my pay 30k€ in capital gains taxes.
Like this, every year? Every time it has more revenue, it multiplies its future worth, therefore multiplies it FMV, therefore you must pay the CG on the multiple of your income?
You probably don't need to worry about this happening multiple times.
Billionaires may not be a uniquely Canadian problem, but the lack of a wealthy middle of entrepreneurs and reasonably wealthy individuals is uniquely Canadian.
Canadians cheer at taxing the rich and as a result end up with a “middle-class” that is barely getting by, a billionaire class that rules the Kingdom, and nothing in between.
Canada is designed to support Oligopolies. It does so in the media, food distribution, telecom, insurance, banking and virtually every industry in the country. This is an intentional policy decision of punishing entrepreneurs and pushing us out of the country. Look at the recent wealth taxes and the national response to them as an example.
When grandma's Fidelity manager takes 2% every year to buy overpriced mutual funds that themselves eventually just buy SPY, how many dollars do you think goes to capital raises of any kind? The top of the S&P, which essentially determine its returns, are doing stock buybacks with their cash.
You would have been more persuasive if you had said, "Taking cash out of the stock market and into real assets results in inflation, which is bad for everyone, because nobody needs Apple stock to live, but they would like houses."
Yes, people get angry about this, but no one has provided any statistics showing this is actually a common loophole.
The basic idea in the reddit post is that there were lenders giving multi-decade loans at a tiny interest rate (only payable upon death with also sharing a % share of the gains).
Maybe there are lenders who have lots of capital and also don't understand the time value of money, but no one has actually provided the names of these lenders, etc.
According to this: https://finance.yahoo.com/news/jeff-bezos-sell-5-billion-185.... Bezos has sold around $13.4 billion in stock in 2024. If he could easily avoid millions (maybe billions) of dollars of capital gains tax by this one simple trick, why didn't he?
I'm not Bezos or part of his family office so I can't say for sure. My guess would be a mixture of capital demands elsewhere (Blue Origin?) and a desire to diversify. Start-up founders necessarily keep all their eggs in one basket; people building a multi-generational fortune don't.
It is very common to make loans based on using stocks, etc. as collateral. But that isn't what people claim happens with the "buy, borrow, die" loophole. The claim is that these loans have incredibly low interest rates (much lower somehow than the IRS Applicable Federal Rate) and the interest is only payable upon death - which might be decades away. That is how the borrower can supposedly avoid capital gains taxes.
Maybe there are rich lenders who don't understand the time value of money, but doing a quick search, I have not found one stat on how many lifetime loans like this are actually being done.
And that the lender is offering the loan to capture an ultra high net worth investor; so even if you lose money on the interest, you gain on advisory services and fees; plus first bite at holding the accounts of the heirs. Requiring good collateral and high account minimums make the risk for the lender low --- if broad market value drops significantly, the account should still have more collateral to pledge to get back to 1:1. Also, if market value drops significantly, selling shares becomes easier for the investor, as there may be some shares with capital losses, and paying down the loan becomes more attractive.
I know someone who got a mortgage rate way, WAY below prevailing rates (like around 1%, gotten back when normies like us got rates around ~3%), because 1. he is a very high net worth individual and 2. he owns a business that does a lot of business with the bank. So, he gets extra special treatment because he's rich and the bank appreciates his business and expects the relationship to lead to even more business.
It's not a huge stretch to imagine that Jeff Bezos's bank would happily loan him money at some token 0.01% interest rate or some similar sweet deal.
And the loan terms aren't payable at death on any of the loans, they just let you refi every year when you want another $100M for that year's incidentals.
There are many web pages claiming this, but I haven't seen actual statistics on this loophole. To be clear, many, many, people borrow against the value of an asset - from the middle class up to the ultra wealthy and they can defer capital gains in that way. The claim with buy, borrow, die is that you can borrow for decades and not have to pay back the loan until death. Some claim that the rich just keep rolling over loans on to new loans to avoid paying interest/principal for decades. The reddit posting discussing this has been edited since it was first discussed on hacker news, but now it emphasizes that the bank and the ultra wealthy person come to some sort of agreement to share in the gains of the asset upon death. Considering the length of the agreement it seems it would difficult to come up with an agreement that would be fair to both sides in that agreement.
I saw that on reddit, /u/Taxing responded to a different post by the author of the reddit posting and was skeptical of how common this approach is:
>...I too went to law school, earned my LL.M. from NYU and have been practicing in this area for decades with broad family office clients ranging from a few hundred million to many billions, and yes have clients with public companies, private companies, and taken companies between the two structures. I’ve worked at every level and now sit on the boards, manage the relationships, etc., which I enjoy more.
>...I struggle to think of a single family office interested in a lifelong arrangement with Goldman or other firm at that level, providing them strings of participation and control. Over time, circumstances change, and they are not your friend.
So, maybe, the "Buy, Borrow, Die" approach is common practice, but I have yet to see any actual stats on it.
He wanted $13B liquid to start Blue Origin, a pretty speculative venture that might end up with nothing. And wanted to still outright own Blue Origin unlike Musk's Twitter buy that was highly leveraged by the Saudis.
It's a loan in name only.
Regarding Bezos's selling of stocks - perhaps he has offsetting capital gains. See https://old.reddit.com/r/BuyBorrowDieExplained/comments/1f26...
Just like now your stock value would not be taxed while it is invested. But now it would be taxed if you use it as collateral for anything. If you don't want to pay capital gains by selling the underlying stock then you can just get a bigger loan and pay the taxes out of that.
There, now you don't have to liquidate but the taxpayers benefit too when the wealth is "used" by the owner.
I think the sensible option is making death a taxable event, rather than borrowing (with perhaps exceptions for the family farm, but not for the family billion dollar business).
And the second best solution is eliminating the step-up basis, which without deemed disposition at death is just a free gift of capital gains tax rebates to heirs of the most wealthy.
1. No one really borrows against the value of their (paid off) car. 2. Property taxes already, generally, are against the assessed value of the home, so it's already happening for that case. There are some minimal exceptions, like CA Prop 13, of course, but generally speaking, if I want to take out a second mortgage or something, my home's value is already appropriately "stepped up."
But I now assume the tax would be on the assessed change value of the asset, for which a new car or home would be 0, so no tax.
It drives me a bit crazy..
EDIT: Since it's not obvious, this would apply to the very rich, not to someone running a family farm. There would be a threshold and exemptions, which is how most taxes work.
Now, as one of the founder, maybe you own ~40% of that business, so now your paper net worth is $8M, and just made $8M of unrealized gains in that year, how are you going to pay that? There is no way you will ever find someone to buy $1M of your share at the price of that round, you probably wouldn't find anyone willing to buy your entire paper $8M for $1M, because again, the company isn't worth $20M yet.
This is true until pretty late in a VC backed company, most round aren't priced based on how a realistic buyer would value the company, they are priced based on complex dynamics. Even a large number of unicorn startups founders in the Series C/D stages would have paper wealth of potentially 500M range, but absolutely no way to find 50M.
So, you effectively have no way to pay that tax.
This system actually already pseudo-exist in Canada in specific conditions: If you stop being a tax resident of the country, all your assets are considered realized the year you leave and you must pay taxes on them. Which is effectively impossible for most startup founders, because again, your stock isn't actually liquid. This means you can't stop being a tax resident of Canada until your companies either dies or you exit somehow. To be clear you can't easily just choose to remain tax resident of Canada while living abroad, Canada gets to decide, to maximize your chance you must prove that you still have ties, so e.g. you have to keep a home, you have to keep your bank accounts opened there, you must visit often enough etc.
Canada revenue agency offers one alternative: You leave the country but leave your stock in their keep, on the day you actually realize the gains, they will take what they were owed, which sounds great, except if the company fails, or you realize gains at a lower valuation, they still consider you owe them what was computed the year you left, not the day you exit, so there is a real risk of being in debt for the rest of your life.
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.
Additionally, in the minority of cases where it is plausible to force realization, doing so would destroy the notional value of the asset in many cases. The government will have to issue a tax credit, undoing any tax revenue they hoped to gain, but the business is now destroyed so there is no future tax revenue either.
Trying to prematurely force realization of asset value is either impossible or destructive in the vast majority of cases.
I don't think your argument is as strong as you think it is. The value of an asset in a market economy is supposed to be what someone would pay for it. If you can't sell your Tesla stock for it's value, then it doesn't actually have that value.
Because there is a ton of investments that aren't liquid, aren't trivial to value on an ongoing basis, and aren't infinitely divisible.
Again, a farm is a perfect example. Land prices are going up. Your family farm was worth n million, and is now theoretically worth twice that. Do you sell a portion of it to developers to pay the tax on the unrealized gains? Oh by the way, the land is probably zoned agricultural, so you actually can't.
Or, you buy a famous painting as an investment. Do you cut off a piece each year and auction it off?
Yeah, it's relatively easy for stock market holdings. But if stocks get unfavorable tax treatment, all this will accomplish is moving money away from the stock market toward assets that get a better treatment... like investment real estate, with all the problems that entails.
Accurately valuing the painting every year is definitely very difficult.
The same argument doesn't necessarily go for a farmer's farmland. The zoning could of course be calculated into the land value. But I'm unsure if farming economics allow for paying the taxes on those unrealized gains
Yes, if you're rich, you might have other ways to cover the liability, but that's not what the parent said.
And for what it's worth, these "billionaire" thresholds in political discourse are fairly meaningless. The last time the Biden admin "cracked down on billionaires", they instituted IRS reporting requirements for Paypal and eBay when you receive in excess of $600 a year. There just isn't enough billionaires for policies that truly target only them to make a difference, unless you flat out start taxing / confiscating wealth.
The business is irrelevant. We are talking about the tax on the person who is getting income because our government functions from taxes on income. Just like how we charge sales tax on a non-sale when state government functions on taxes on sales. Tax business owners when they extract value from their business.
Here’s a hypothetical:
- I own $100 of stock in Company A.
- The First International Bank of efsavage decides to accept that $100 in stock as collateral on a loan. So I pay taxes assuming a value of $100.
- When I dispose of the stock, it is only worth $80.
Will that be a retroactive credit, meaning that I will have to amend my tax return in the year that I collateralized those assets? Would it be a forward tax credit, meaning that I could apply that credit to future years?
I worry about this both from a bookkeeping point of view (since this is potentially a lot of credits) but also worry the ways it could be manipulated.
And.. the bookkeeping thing is really solvable. That's kind of what banks are for
You created a tax event and paid taxes on it and you got a loan for x% of $100.
If you sell the stock at $80 you'd pay no taxes on the appreciation (-$20). No credits, investing is risky.
Rage about. Off to a good start. I wonder what the conclusion will be?
> [look at all of these reasonable-looking arguments for the existing tax laws]
Sure. Most people are fine with rich people not getting taxed into the middle class or having to work for a living.
What does this prove about anything?
> These all suck, and the government generally collects money on assets as they move not assets at rest. I see no way to resolve it that isn't suckier than the status quo and so am left with the conclusion that people who agitate for such changes are more resentful of the rich than they are worried about the justice or lack thereof of tax avoidance.
Hmm. I knew there was something off about attributing “rage” straight off the bat.
I don’t know how you disentangle “justice” from “resentment” so easily. Resentment IS EXACTLY injustice over a sufficiently long enough time.
But I tend to see this idea that people who are upset about something real need to have... pure emotions. They must be upset because someone else (the poor maybe) are getting shafted. They certainly can’t be resentful (jealous) or something selfish like that.
(I don’t know what dimension you live in in the real world, confronted with these kinds of people, where this would be a compelling argument to anyone. Seems like a Let Them Eat Cake position.)
So people who are rightfully upset—you don’t even argue against that part—get dismissed because they have allowed impurity into their hearts. While the rich get to do their tax schemes. But, he shrugs his shoulder, better that the rich fleece the government than that the commoners have impure thoughts.
The government can also collect money on assets at rest (or at least, on cash at rest). They do so by creating money. It could be an interesting tax regime where the only forms of taxation are taxes to discourage action (e.g. tax on tobacco) and money creation.
Removing the step-up in basis seems like an obvious fix. Record the basis at the time of transfer, then charge taxes when or if it is sold. Adjust for inflation if that seems reasonable.
Is there anything wrong with this? It doesn’t require selling on receipt.
You get a 1099 or W-2 for income, why can there not be an equivalent for spending?
This plus power law formula land value tax rates would fix multitude of societal problems. Land values are also already in electronic databases.
And get rid of income taxes altogether. This would disincentivize hoarding and wasting, and incentivize working and being efficient.
The only other aspect of rent seeking I can think of that would need to be nerfed is copyright terms being reduced to 10 years.
But staying at rest has been used as a way to sidestep taxes for so long.
I'd rather have all investments be taxed every K years as they were sold and bought back. Ideally with selling dates spread throughout the K days to avoid huge spikes.
Why? In an hypothetical world where getting a loan on an asset is impossible (or taxed the same as realizing the gains), you still don't get taxed on unrealized gains. You can leave your stock alone and you aren't forced to sell anything.
Of course if you decide that now that you are worth a billion you must live like a billionaire, then yes, you will have to sell stock, reduce your influence in the company and pay tax on the gains.
I don't see any problem with this? It offers a way for the stock owner to choose if they want to use the stock as power (don't touch it) or as cash (sell it), only taxing you when you opt for the later.
edit: I realised I might have misread your post as defending the system allowing one to use unrealized gains to back a loan, hence enabling the buy/borrow/die loophole, when you are in fact defending against taxing unrealized gains. To me the obvious fix is to prevent those loans as discussed above: force people to choose how they want to use their assets, if they choose to use them to live like kings then they must pay tax.
Firstly, do you want to prevent corporations from taking loans against their assets? Preventing that seems like it would be quite detrimental.
Secondly, how do you differentiate legitimate corporate expenses from personal expenses? Is a billionaire having one of their corporations rent a yacht from another of their corporations for a business meeting with another CEO who just happens to also be their friend a legitimate business expense or a personal expense? What if the yacht rental company rented it to the CEO's company instead?
Most stock wealth isn't doing anything for the company. If the stock price of Apple went down by 90% tomorrow for no reason, the main effect on Apple would be... almost nothing.
The employees who get equity compensation would be mad but they don't use their stock value to fund R&D or expansion or salaries.
Also, instead of Apple try imagining NVIDIA: their stock went up like 1000% in two years, they are now a trillion dollar company. If they had to pay tax on that it would bankrupt them. Or, they could use all their cash + borrow some money against the stocks to pay tax. But then the stock can suddenly crash 90% and the lenders, seeing how their collateral is now 90% down might start demanding repayment of the loans, again, bankrupting the company.
"Unrealized gains" tax simply does not make sense. It's just greedy government attempt to squeeze more money from businesses.
I'm suggesting if an investor in NVIDIA uses their $100 Million in stock that they bought for $10 Million to get a loan they would have to pay capital gains on that $90 Million capital gain. Just like they would have to pay capital gains when they sell the stock. No stock sale has to occur - the investor could pay $18 million in taxes out of their loan.
When we decide to tax things is inherently arbitrary: I'm suggesting that we count "borrowing" against an asset as a taxable event which is a simple and straightforward change that makes buy-borrow-die more equitable: government gets taxes at the same time as the investor gets the benefits.
If you refuse to believe anyone who doesn't share your view of class struggle is either stupid or malicious, I don't see why you bother engaging at all.
Yes, it is truly fascinating.
If the step-up basis occurs first, the fix here seems very obvious, but I assume ultra-wealth people have lobbied to keep that from changing?
[0] ignoring the "alternative valuation" option
[1] at least per my "decoupled" year 1999 understanding. And no, that doesn't mean my experience is from 1999.
In your scenario, the Estate Tax would be calculated on $9B. The executor/per.rep of your estate would then have $10B shares with a $1B loan against them. The basis of the shares would be their current value, so if they (or your heir(s)) sold $1B shares to pay off the loan there would be no capital gains tax. There would also be no capital gains tax if they sold the other $9B shares (but Estate Tax was paid on them instead). Of course, they might have to sell some of the $9B shares to pay the estate tax bill.
Where things get really interesting is the charitable contribution deduction. If you sell $1B in shares and donate $9B to a nonprofit (likely set up and controlled by you, and subsequently your heirs), then you get a $9B deduction on your taxes (wiping out the capital gains on the $1B). Then no estate tax, since they're not yours when you die. From what I understand it's also a great asset protection strategy against random creditors.
When we're talking billions and minimizing estate tax, the latter dodge is more applicable since it's going to awfully hard to actually spend down billions. The loan plus stepped up basis dynamic is more about dodging capital gains taxes while actually realizing and spending the gains while you're alive, which isn't really captured by your scenario.
Also, flip your example around and say someone took a $9B loan [0] against their $10B in stock. Now when they die, their estate has only $1B worth of net assets, yet ~$4B in estate tax liability under your idea. It's better to prevent this situation from happening by making the taxes due ahead of time, similar to how once you give away enough taxable gifts (form 709) you need to actually start prepaying what would have been paid by your estate.
[0] and somehow spent it. I stuck with the billions figures because it makes the analysis easier (tax rate asymptoting out to the top bracket), but this is likely to be more relevant with much smaller estates.
$10B worth of stock ($0 basis), take a $9B loan on it, then donate the encumbered stock to a charity that you don't even control. Now you've realized 90% of your gain, (more than if you were to have paid capital gains tax), plus you get a $1B deduction from the charitable contribution. When the charity sells the stock to pay off the loan, they also don't pay capital gains due to being tax exempt.
The charity thing is another loophole that needs reform (and doesn't even seem to be talked about), but you don't even really need a charity - get the net value much closer to zero, and gift it to arbitrary non-rich person(s), probably near the end of their life. They can liquidate stock, live off the money, and give away non-legible gifts before the tax bills start to catch up a year and a half later.
This topic is really about a hole in the capital gains tax, and it's unfortunate to see so many commenters focusing on the estate tax and ending stepped up basis (seemingly because that's the way the political winds are blowing), when most estate planning just sidesteps the estate tax. For example this original article is exceptional because most people with $7B in possible estate tax liability would head off that situation by the use of giving, trusts, and whatnot. If those people are still allowed to use this loan loophole to avoid capital gains while living, then you haven't really fixed the problem.
>It’s kind of cool? Like you could imagine a hierarchy, in roughly ascending order of wealth:
>Too poor to pay taxes.
>Rich enough to pay taxes.
>Rich enough to not pay taxes.
>Rich enough to not even bother with not paying taxes.
Further does this include all taxes or just income taxes which are only a portion of revenues used to make less well off people look like moochers.
For instance, in the US, there’s social security and Medicare taxes -- and payroll tax, the social security and Medicare tax contributed on behalf of employees by employers. Renters also pay their landlords property taxes. Sales taxes, tariffs, etc are all born by end users.
The reality is more nuanced. Introducing a sales tax on restaurant meals affects both diners and restaurant owners: restaurant owners can't pass on the whole increase to diners, and diners cannot afford to go out as much.
Similarly, property tax levels influence landlords' decisions to enter or exit the rental market, impacting housing supply and, consequently, tenant rents. 'Paying' a tax has two distinct meanings:
- Who bears the economic burden after the tax is introduced
- Who is legally responsible for paying the tax
These two concepts are not always aligned.
Property tax in the US is a liability of the owner. This is in contrast to other systems like the UK where it is a liability of the occupant.
You dismiss its application as a 'silly distinction' and repeat the fallacy that the incidence of taxation falls on the party who is legally liable.
If you don't believe me, and don't want to read up on 'tax incidence', consider what would happen if sales tax were paid by retailers instead of customers. Would the flow of money change at all? Would any party be worse off or better off?
Why this matters is because in some cases, owners can end up ‘under water’ with even rent not covering property taxes in the US.
In other places, that may not be possible.
And what about a retail store in England where the VAT isn’t itemized? Did I pay or did the store?
And it varies between much lower than you would expect, to much higher - and doesn’t generally change the amount they can charge in rent between the two scenarios. Though of course, landlords will go broke eventually if on average rent doesn’t exceed property taxes, finance costs, and other costs they pay on average.
Competitiveness/survival between landlords over time will often hinge on their ability to pick the best options and structure/time this well to minimize their costs while maximizing their returns. A much harder problem than I think anyone who isn’t in that game realizes.
Which is why successful property management and investment strategies vary quite a bit depending on these specific details, like who pays what, when, and under what circumstances.
So all I’m getting from what you’re saying is you don’t actually understand what you’re talking about concretely, and you’re going off a first year economics textbook instead of actual experience.
Am I correct, or not?
In a way that means the details matter and you’ll get different end prices, even for the same nominal tax rate, depending on how it is applied.
For instance, when sales taxes are not shown at point of choice (on the shelves) they tend to not impact consumer behavior (US), where when they are (most of Europe), they do.
Which is also why in the US, retailers tend to fight efforts to include sales taxes into on-the-shelf prices. Because they know it will impact sales.
Just like in jurisdictions where renters pay/see property taxes, that impacts their choices, where in places they don’t, it doesn’t. At least in any specific, individual way.
That is my point.
Seriously though. Renters pay the property tax, even if they don't get to see the bill.
There's a simple way to visualize why is not true:
You're renting a property for $1000/mo. Whatever the owner is paying for property taxes, you don't know.
Then, property taxes go up by $200/mo. Do you think your rent won't go up by at least $200/mo as a direct consequence of the tax increase? Because it will. Because the renter is of course paying for all costs, including those taxes.
So, before property taxes went up, the landlord could have raised rents by $200/month, but hadn't because..?
Because you don't pre-date inflation.
It is the same as asking why the supermarket doesn't raise the price of milk to what inflation estimates say it'll probably be next year.
Look at it a different way. If the $200/month was a new tax that all renters had to pay, what would happen?
Some landlords are bad at guessing the correct numbers. Others are savants. In aggregate, renters end up paying almost all of it over time if not immediately, and those that don't end up suffering in other ways (when the landlord just stops paying the tax entirely, but taking your rent, the building gets sold, and you don't get to renew the lease because they're going to knock it down and build luxury condos).
What if moving costs $1000, which is another $83 per month over a year.
How much wealth do they have compared to other population?
That comes out to around 4.1% of the total wealth. However, the number from Wikipedia is from 2022, so this figure isn't going to be entirely accurate.
> Rich enough to control a dominating force of violence - collect taxes.
There is an element of competitiveness there. Some rich want to be known as rich and so they can brag about paying the most taxes that in turns implies they have the most money. Others want to be quieter about their wealth and so don't want you to know they have it and wouldn't tell you how much taxes they pay.
And it's a good thing that government is strong enough to be able to collect large taxes. Contrary to popular opinion, rich people are mostly OK paying large taxes, but only as long as all other rich pay their share as well. The grudges they hold are only about unfairness, not about amounts.
In fact we should probably celebrate gifts to the US government more than we do.
I had the idea that we should put a donation box on tax forms. The 100 top donators get on the “US 100” list (like Forbes) but it’s based ONLY on how much you donate, not how much you claim to be worth.
It’s one thing to claim to be rich to a Forbes reporter, it’s another to have the (tax) receipts to back it up.
I don't believe it's on a tax form, but you can absolutely just donate money to the US. They make it very easy, just go to pay.gov.
https://fiscal.treasury.gov/public/gifts-to-government.html
I like your idea of adding a leaderboard.
https://www.forbes.com/sites/kenrickcai/2021/09/28/elon-musk...
But some do.
> 57th place means nothing.
It means you're on the board and got one higher than 56th place. I'm a top 50 rails contributor, that means something to me and to others.
It's kinda like F1. Some teams are racing for the constructors championship. Some teams are racing for the midfield. All of them are racing for even a single point and to stay in the game.
> Flaunting would definitely be getting your name on a list that you don't need to be on.
Oh, like a list of the largest yachts and their owners?
Society is about the compromise. However that compromise makes nobody happy.
Jeez the pedantry around here.
Let me spell it out: Upper class people don't have to work to maintain their existing lifestyle. Steve Jobs could have continued wearing black turtlenecks and paying fines for parking his Mercedes in handicapped spots for the rest of his life, without doing a lick of work. That he didn't is a credit to his work ethic and passion for the work.
I wouldn't want to live like that and I wouldn't wish it on even the most undeserable (life without parole prisoneers). you could do it. Some do it for a month or two in college as they see the world - but they go back to a more normal life and just fondly tell stories.
One can of beans is ~400kcal and costs ~$1.30+tax in my closest QFC, so you need around $4 per day just for beans (3 cans). 5lb bag of rice (50 servings, 160kcal per serving) is $5.50, & you need 5 servings per day to reach 2000kcal, so +55¢. That's $135/mo just for rice and beans, and I have not checked if that satisfies daily protein intake needs.
Where will you set up your tent without getting arrested? Needs to be walkable from a Goodwill, otherwise you need transport once a year. How are you cooking the rice? Where are you getting the potable water from?
Decent sleeping bag is another $100.
Even your unserious response is underestimating the amount of money required.
Sorry, but with such an outrageously low estimate (US poverty line is $15k a year), you have to put in a bit more effort and show some receipts.
Generally speaking, the sad truth of a complex economy is that coordination is hard, and there's usually a short-term privatized gain to be had by someone willing to poison the future and the commons. No amount of benefit to humanity overall or even the specific society such a person lives in will convince a person who simply doesn't care about anyone else. Fortunately for humanity, a very small minority of people actually operate like that. Unfortunately for humanity, some of them have managed to accumulate a lot of power
What puts a lid on how much money the Fed creates is the desire to keep inflation to reasonable levels, preferably 2% per year. Your burning your cash allows the Fed to create more while adhering to their inflation target. Someone please correct me if I am wrong, but my understanding is that although the Fed decides how much money is created, the Fed is not allowed to keep or to spend newly-created money, but rather must give it to the Treasury (perhaps through some complicated or non-obvious mechanism) which makes it available for the government to spend.
Predictably, politicians who support MMT only did the printing part and skipped that bit once inflation started.
If the taxed dollars ended up with say hurricane victims or other struggling Americans, those dollars would chase goods and services domestically driving up the price of those goods.
Now consider if instead you helped fund Israels socialized medicine program or paid off some of Ukraines debt or paid interest to Chinese creditors. Those dollars wouldn't have much effect when it comes to increasing the price of eggs in the US as they are being spent far away in another economy.
A similar effect could occur if the money ended with the wealthy folks, say wealthy owners of private defence contracting firms, as those dollars might chase building a super yacht (inadvertently employing some people but also consuming foreign made materials and labor) instead of trying to rent an apartment in Iowa. Less dollars chasing Iowa apartments, considering supply and demand, lower prices, lower CPI.
Take dollars from the middle class who will drive up the cost of the American dream and instead give them to people who will drive up the price of luxury goods.
It's never explained this clearly beacuse people would riot, but with this framework the choices of government in the last few decades or so suddenly makes more sense.
(I don't endorse MMT)
Insomuch as "implemented" means using the policy prescriptions (specifically, the job guarantee), there are no countries doing that, but various real world experiments have touched on it.
Japan had done things differently (albeit from a different perspective of mainstream economics) and is a good test case for the MMT model, especially given how many bet against the yen (and lose), implying the mainstream models are struggling there.
> Insomuch as "implemented" means using the policy prescriptions (specifically, the job guarantee), there are no countries doing that, but various real world experiments have touched on it.
Something that you can't implement, doesn't work. In practice MMT is a smokescreen for politicians to print money for their friends.
I can find you far more people who wish to abolish the fed and return to the gold standard than people who are willing to have the levels of taxation required to limit the inflation caused by funding the government with unsound money.
MMT's advocates policies would work if it wasn't for that pesky democracy and realities around campaign finance.
MMT emphasizes that taxation (P-G) is not necessary to "fund" government spending. Instead, taxation primarily serves to control inflation and create a demand for the currency. Taxation creates a value for the currency since taxes are payable only in the government's currency.
When we hold the P-G-P view of government spending, we assume it operates like a household - that a government has to collect taxes before spending and this is viewed by MMTheorists as an antiquated perspective. The misconceptions of "The government as a household" were based on the gold standard or fixed exchange rate systems, which since 1971 no longer apply.
An additional point to add is the mechanism by which taxation controls inflation. Tax serves to suppress demand in the private sector, freeing up resources that can then be bought at non-inflated prices. This is why super wealthy people are irrelevant to a sovereign government's ability to spend; their marginal propensity to consume is too low to be seriously impacted by normal levels of taxation. It's also why tax has to be broad base to be useful.
MMT alone may not provide sufficient guidance on how to adjust outlays and receipts to manage employment and inflation.
MMT may not be politically feasible. Politicians may not be navigate politically unpopular but economical necessary.
MMT may be domestically sound, but challenging to implement regarding international trade. It may result in devaluing compared to other currencies.
MMT may suggest that interest rates can be kept low indefinitely. It's unclear if this would result in excessive risk taking.
MMT may not be applicable to developing economies.
MMT may work in the short term to manage employment and demand but fail to cultivate long term economic development.
MMT's implication as having a larger governmental impact on investment may crowd out private sector investment.
MMT if implemented could be constrained by international investors. If international investors dislike a policy, it may have domestic implications.
MMT depends on having a government effective enough to implement it. If a government is too dysfunctional, MMT may fail in practice.
The primary policy prescription of MMT is the job guarantee, which explicitly addresses the question of how to manage employment and inflation. The job guarantee defines the value of the currency, with other spend floating relative to that, whilst simultaneously providing full employment. In any case, the current model is pretty broken in which fiddling with interest rates is assumed to have a direct casual link to both (and depressingly in opposite directions).
> MMT may not be politically feasible. Politicians may not be navigate politically unpopular but economical necessary.
Insomuch as descriptive MMT is what happens in most sovereign currency areas, this is just a problem of communication. You are right that getting the politics correct is both hard and important. I'm not sure the policies will in aggregate be very unpopular though once a non-made-up description of what limits spending is understood better by the population.
> MMT may be domestically sound, but challenging to implement regarding international trade. It may result in devaluing compared to other currencies.
A floating exchange rate is a feature not a bug. Current attempts to maintain a soft peg are deeply damaging domestically for many countries. In any case, countries that are confident in their monetary and fiscal policies and that have a sound economy seem to be more robust than those that try to maintain a soft peg (see Japan).
> MMT may suggest that interest rates can be kept low indefinitely. It's unclear if this would result in excessive risk taking.
Excessive risk taking needs dealing with at the political level with actual laws and regulations. Interest rate policy is a crap tool to deal with such problems.
> MMT may not be applicable to developing economies.
Why not? It explains what their actual constraints are and the risks of taking on foreign debt or pursuing an export led growth strategy etc.
> MMT may work in the short term to manage employment and demand but fail to cultivate long term economic development.
I'm not sure what this has to do with MMT. The post war period with much higher employment and stronger government intervention had much higher growth than the following monetarist/neoliberal era, so perhaps the status quo is the problematic position.
> MMT's implication as having a larger governmental impact on investment may crowd out private sector investment.
Far from crowding out, it crowds in in practice:
https://billmitchell.org/blog/?p=12022
Again, the historical evidence shows when governments stop spending, private investment collapses.
> MMT if implemented could be constrained by international investors. If international investors dislike a policy, it may have domestic implications.
What domestic implications? If you're thinking about direct foreign investment, this is problematic in its own right. It might increase domestic employment and potentially increase local skills, but it is also extractive and drains the nations' equity. This possibly has stronger implications for low income nations that don't have a good education base and well developed industries, but MMT at least makes clear where the trade-offs lie.
> MMT depends on having a government effective enough to implement it. If a government is too dysfunctional, MMT may fail in practice.
True, but then so do all political systems. MMT "failing" is also a strange concept given MMT describes the system since the fall of Bretton Woods. What's remarkable is how stable (notwithstanding the obvious "shocks") the system has been despite most governments operating as though they were still inside the Bretton Woods system.
There is nothing to disagree with, no claims were made!
> and putting it towards (wasteful) government programs to "burn it" in a sense.
This claim isn't congruent with the idea of MMT.
One way to look at MMT is asking, does our government have to operate like it has a checking account, or can our economy act like an MMORPG economy?
For example, Blizzard has no obligation to collect coin before distributing coin. Blizzard thinks in terms of coin sources and coin sinks and adjusts source and sink policy in response to aggregate demand and player engagement goals.
(Of course, the Austrians have a peculiar notion that inflation can by definition only be considered as such if it's associated with increased money supply. Another reason to ignore them completely)
What would happen if we halved it? Dunno, but to achieve that, stuff has to happen, and depending on that stuff, you might get price changes. I expect if the gov engaged in QT to achieve it, very little would happen.
Except Real estate prices more than doubled. Also the Dow went from ~11k to 32k . So almost triple.
YES! YES! YOU ARE CORRECT, THAT'S MY POINT. Lowering the interest rates is how you EXPAND THE MONEY SUPPLY.
But what would you do to not spend it? Put it in the bank? Buy bonds?
There's another very important effect which is the spending on things that matter induces taxation (employment taxes to deliver the thing, sales taxes etc). This is a geometric series reducing the money supply on every transaction of real goods. What matters is the flow, not the stock.
https://new-wayland.com/blog/structural-deficits-are-deflati...
For detailed counter arguments, see Branko Milanović Global inequality: A New Approach for the Age of Globalization, James Kwak Economism: Bad Economics and the Rise of Inequality, Walt Bogdanich & Michael Forsythe When McKinsey Comes to Town: The Hidden Influence of the World's Most Powerful Consulting Firm, and many other books.
It’s a classic logical fallacy; appeal to authority. There is no reason to believe any of these writers have a better understanding of how the world works than any other “authority” of the past like Karl Marx.
Just because someone says something in a book doesn’t make it true.
Or they are a rent-seeker, or a straight-up thief that sucked a lot of value out of the world. (Or one of their ancestors did, etc, etc.)
Or they robbed Peter to create value for Paul, and took a share of the difference.
These are all tried and true mechanisms for wealth generation. Without any information, you shouldn't assume that their contributions were net-positive.
Given the way everything is being made into its crappier form, it’s arguable that even tech isn’t “adding value” anymore.
Doing something positive-sum is a way to become a billionaire, but many people are very handsomely paid to ensure that their clients are on the good side of zero-sum transactions.
Where "well-managed" means "good at delivering money to its shareholders", which is at best obliquely related to a positive impact on the world. (Also, I'm skeptical that the stock price in itself makes that much of a difference to what the company is able to do.)
> Another net positive of stock trading is making buyers and sellers available all day, for anything on the market. Yet another benefit of stock trading is to make it more difficult to manipulate the market - there's a reason why pump and dump scams only occur with assets that see very little attention (i.e. are low-volume).
In other words, the benefit-to-the-world of stock trading is that it makes it easier to trade stocks? And both of these are the result of unprofitable trading as much as profitable trading, so they can't be the proof that the money comes from the value delivered!
But stock trading also penalizes well-managed companies in slow-growing or more mature industries by giving them a higher cost-of-capital, just as it would if they were poorly managed. It seems a haphazardly blunt instrument for allocating liquidity to value generation. It piles on where rewards seem ready to be reaped, and makes it harder for mature sectors to renew or reinvent themselves.
That money management service includes, amongst other things, picking stocks. But that's the tactical "what". The value-added element is that he preserved and grew that wealth instead. It turns out that is hard to do, and is indeed a positive sum service to customers. They get to relax _and_ make money. Great outcome.
Only if the shares are newly-issued, though.
Usually your counterparty is just someone with different cash flow needs, or who disagrees with you about the future. No benefit accrues to the company.
https://www.irs.gov/businesses/small-businesses-self-employe...
https://www.irs.gov/businesses/small-businesses-self-employe...
https://www.irs.gov/businesses/small-businesses-self-employe...
>The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether or not the donor intends the transfer to be a gift.
> Why this free worker confronts him in the sphere of circulation is a question which does not interest the owner of money, for he finds the labour-market in existence as a particular branch of the commodity-market. And for the present it interests us just as little. We confine ourselves to the fact theoretically, as he does practically. One thing, however, is clear: nature does not produce on the one hand owners of money or commodities, and on the other hand men possessing nothing but their own labour-power. This relation has no basis in natural history, nor does it have a social basis common to all periods of human history, It is clearly the result of a past historical development, the product of many economic revolutions, of the extinction of a whole series of older formations of social production.
You may think it's no biggy since the limit will be so high.
1. First of all, when party A contracts with party B, party C (that's you) does not have a moral right to dictate an upper limit on how many times they can do that or what the terms can be as long as the transaction is legal and A and B are willing participants.
Thus, either A or B can build up an arbitrary amount of wealth and you have exactly zero to say about it. Would you have similar concerns for people who have a disproportionate number of friends, or sex partners, or hit songs, or hell, even votes?
2. If there were to be an upper limit, what is the limit? Today it's a billion dollars. What if it's 100m next, then 10m, then 1m, then 100k? What happens after a couple of decades or centuries of inflation? I suspect you don't care about this because the limit seems far out of reach to you. And so it might be - for now.
3. If there was a limit, who will decide what it should be? What are their incentives? Do you really want a jury of your peers reviewing your financials and drawing lines through it?
4. If there was a limit, who will enforce it? And how? Hand over a check or you go to prison?
There's no way to implement this without an authoritarian regime that has unlimited power over its citizens.
The feudal systems arose as a way to organize military defense locally in the absence of a strong central power like the Roman Empire.
There are castle strongholds, control of choke points, a lower strata that are required to work the land and pay tithe upwards to the military heirarchy.
Feudal systems have existed in times and locations where there was little need for military defense against external forces, they persist in form as a polite, polished, chivalrous bikie club on horses, mafia with great houses.
Warrior nobility systems farm farmers.
A farm is a system with many living beings, but most of the benefits accrue to those we call the farmers.
A farmer farm is a called a fief (feudum in latin), so it's no surprise that under feudalism most of the benefits accrue to those who have control over heaps of feuda.
Would it be true that under capitalism most of the benefits accrue to those who have control over heaps of capital?
[to the original point: capitalism works very well when it allows people to trade and specialise in their comparative advantages; under what conditions might it work less well?]
EDIT:
> little need for military defense against external forces
I think they were also successful even where there was need, as long as those external forces were also based on a warrior class.
What Napoleon managed was to "scale" the nature of warfare; two poorly remembered quotes from a book one of his cavalry generals wrote:
— 10 mamluks could beat 30 french, but 100 to 100 was even, and 300 french could beat 1000 mamluks
— our troopers' horsemanship was pitiful, and their officers' not much better, yet with this cavalry we made the tour of Europe
I'd say both point to innovation in the use of mass over class.
It motivates a search for the mystical beast: Marxist financier (not the pastry?)
(Not to mention elucidates the boney/HF-inspired principle of intertwining* (wrt scaling — CENDEC, decentralizing by centralizing — marxist-financing-in-itself))
*https://archive.is/FxHSl
https://news.ycombinator.com/item?id=40603483
Note that 1984's Inner Party, despite not owning anything, benefits from everything; compare Plato's Guardians: https://news.ycombinator.com/item?id=24069572 (or Номенклатура?)
On a straight CenFi note, even Cicero is more subtle than he'd appear by my contextless quote in https://news.ycombinator.com/item?id=41796726 ; he may have enlisted Cato to frown upon usury, but I take http://www.perseus.tufts.edu/hopper/text?doc=Perseus%3Atext%... as implying that he smiles upon clipping coupons: Sed ut pecuniae non quaerendae solum ratio est, verum etiam collocandae, quae perpetuos sumptus suppeditet...
[the distinction between ownership and benefit in both code and common law jurisdictions has its roots in roman law, but unless either of you are really interested I'm not going to delve in that graveyard]
EDIT: HF? Our Ford?
EDIT2: for an SAP advertorial, I like TLTF! pigs acorns etc.
I recommend this question as an interesting conversation starter at parties: Is it in the self-interest of the most successful capitalists to have a well-functioning capitalism?
There are people who never learned this or have essentially forgotten it. Some ideologies bury such truths.
Among business/tech circles, there is a fairly common disdain of regulation. People can conveniently forget that self-interest taken too far can destroy the conditions that make competition work.
It is one thing to criticize a powerful monopoly that isn’t you. It is another thing to say “Oh. Maybe what I’m doing is part of the problem.”
Any particular reason you believe that?
It’s right, or it isn’t.
Morally you should probably be spending more time figuring out how to get everyone their first car instead of worrying about your legal rights in owning your second.
And if your focus is on providing that first car, then the system currently doing that en masse for billions of previously-poor people is called “capitalism” and your moral imperative is to speed it up, not slow it down.
To be charitable I’ll point out that in general that’s not what you’re arguing for. There is a real sense in which personal freedom is essential to people making it out of poverty. Protecting one person’s and not another’s would defeat the point.
Here is the compromise. It should be easy for people to do things that billionaires would have no point doing (i.e. take out a business loan of $10K) and difficult for billionaires to do things that people would have difficulty doing (hoard the global supply of some good). That’s if your goal is to have an equitable society where everyone is on the same difficulty level, more or less.
Approached this way there would not be a slippery slope because the delineation is quite clear. Moreover there’s no squashing of personal freedom, a billionaire is always free to do things a regular person is able to do. In fact the system we have now basically squashes the freedom of the average person because they are not free to do things (buy a house, have a chance in court) by virtue of not having money while other people have a ton.
In the face of calling out someone else’s ignorance by saying we are all ignorant then going on to assume the thing you like is wonderful while assuming the thing you hate is terrible.
Classic. PG would be proud.
That’s bad?
Gives off malcador holding the golden throne for a short time energy
That could buy a ton of arms and equipment and likely enough funds to be successful depending upon what the ultimate goal was.
Although there is the aspect of the immigrant being grateful for American opportunities, its far more likely that Fayez Sarofim didn’t expect to die and had these naked assets outside of the trusts and nonprofits. Since he also had trusts and nonprofits.
The latter is to be expected. Forbes only covers certain type of wealthy people for logistical if not also political reasons.
It does not cover powerful people who control enormous wealth but ownership maybe murky what is personal wealth and what is state owned, royal families or dictators like Putin or Kim Jong Un or their extended family will never make the list.
Beyond those kind of people, the murky and opaque ways that money can hidden also means it is hard to track estates that did not come from publicly made fortunes (ex: from listed company etc) that can be somewhat easily tracked.
Even when public like Bitcoin and crypto, Nakomoto 's estimated ~1.1M bitcoins is worth $70B today, nobody knows who he is. There haven't been any transfers from those addresses, however that doesn't mean a part of that enormous fortune is outside the bitcoin ecosystem as real money, the owner of the wallet could be using them as security for large loans like Elon (or other rich people typically do ) does with their stock without actually selling it to minimize tax.
I wasnt talking state actors and unlinked crypto fortunes
Just wealth from opaque sources and opaque vehicles
All limited partners in Venture/Hedge/PE funds are opaque for example
…
> Behn’s clients typically want to maximize the money they leave for their children or establish a philanthropic legacy; some seek to do both.
I’m sure that the numbers on these schemes work out favorably on paper, but if you lived through WW2 I wonder if you might be willing to pay a premium to give your immediate heirs maximum flexibility, knowing that the future is unpredictable.
That said, 2 developed nations are at war, and a NATO nation is being substantially threatened.
readers and space for ads on the magazine pages are both called inventory in the biz.
On the other hand how much is sent to external firms where most of their expenditure is in the US and thus comes back rather swiftly in taxes, and how much is siphoned off to overseas stores of wealth.
It forces companies to distribute gains to shareholders, not amass it.
It already exists, we just don't enforce it enough.
> The data wasn’t erroneous, Treasury officials found, who are legally forbidden to discuss tax filings.
"The data wasn't erroneous|who are legally forbidden to discuss tax filings."
The best correction would be something like:
"Treasury officials, who are legally forbidden to discuss tax filings, found the data wasn't erroneous."
"Treasury officials found that the data wasn’t erroneous, though they are legally forbidden to discuss tax filings."
The problem with the original text was that the rule that the officials had was said BEFORE the main point about what they found - which is why the "officials" were brought up in the first place.
This one states the important part of what they found, and then gave the addendum that they have a rule that adds a conditional to the nature of sharing the finding.
English is weird, by the way.
Where can one find this daily balance sheet?
Billionaire heirs use the inheritance to buy a yacht, big tax bill, mostly use the inheritance to continue funding things that are generally good for society, smaller tax bill.
There's already exemptions for both income and estate tax for donations to charities or governments to benefit society. It's possible to set up a private foundation, with some additional guardrails to prevent abuse, if you want to give the money directly to people that need it.
Arnold Schwarzenegger famously explained that he remains committed to a demanding bodybuilding regimen even long after becoming fabulously wealthy precisely because his physique is a form of wealth that cannot be bought at any price, and is available to almost anyone who wants it badly enough. A billionaire facing an acute and aggressive terminal cancer diagnosis has all the options anyone could want, but one.
Less work, less risk, the ability to corruptly influence multiple people in congress by proxy rather than scrounging around for funds from corrupt private individuals out to influence policy in their favour.
Most people aren’t public figures, wealthy or not
He had a job, a bunch of kids, multiple wives, and a 250 M divorce, among other things.
Obviously some people knew this. It just wasn’t in the public interest, like 99.99999% of things that have ever happened :-)
To me it means living in a country where the government's debt ain't more than 30% of the country's GDP. So I moved to such a country.
So my choice is to live my life and enjoy it as much as I can.
>Billionaires are like black holes. We deduce their existence from the fundamental laws of capitalism, see their gravity pull politics into their orbit, even detect signals of their existence in the public markets.
I dont know about others. This is very beautifully put. But I am wondering if anyone has an counter argument. Because this basically means money > power;
> "As gravity pulls politics into their orbit."
It may be true in US or other democratic nations. It certainly isn't true in Russia or China. If what was described was fundamental laws of capitalism, Could we argue those nations where power is greater than money are not capitalism?
If so, what is the opposing force against the laws of capitalism? And are there anything in physics such as opposing force of the laws of gravity? Without going into Space Time?
It may have been true at some point. But, Putin put an end to it. He killed oligarchs when they fell out of line. There are some ex-oligarchs living outside of Russia, no longer super rich, after Putin took away their wealth.
Confiscating all the US billionaires' wealth wouldn't even lower the US's debt by 20%.
France's public spending is 60% of the GDP, the situation in France is totally catastrophic (6% deficit atm) and... We should listen to Piketty because he's only ever worked public jobs and... He's french? And came up with an ultra-simplistic formula using bogus data?
I mean... If Piketty says it, obviously government spending representing 60% of the GDP ain't enough. Let's make it 100% and called it a planned economy. Because we saw a lot of fully functioning communist societies on earth?
Ponder this.
so in other word confiscating the wealth of < 1000 people would reduce the US (a nation of ~300 M people) debt by nearly 20%. In other words we could significantly reduce the budget (much less interest payments) by taking away the wealth of ~0.0003% of the population. That seems like a no-brainer in terms of policies (the government makes decisions that takes peoples wealth away every day).
If the US were to implement such measures, get ready for an exodus of talent and capital.
Why would it damage that ability? The assets those billionaires own aren't going away. The skills of the people working at those businesses aren't going away.
The Forbes list only include people who Forbes want it to be listed and / or are public record. For example Michael Bloomberg is included but he is not even on the Bloomberg billionaires list, simply because Forbes want to expose him. And there were plenty of Billionaires in China who wasn't listed before lots of information becomes public. And I would imagine the same for Brazil, India or lots of other countries.
These list can only include people by their stock market cap or worth. It doesn't include people who are in the property market and basically own or operate via private equity. And there are plenty of billionaires in the property market. Along with many other asset that we dont even know or aware.
Another thing, if a person with $10B net worth of stock for 25 years, and the stock has been paying 3% dividends per year. You will still see him listed as $10B net worth. In reality he has $10B of dividends already. ( Although in US I think dividends are taxed ). And that is excluding any investment he made with those dividends and operate completely in the dark.
Basically because the ultra wealth are so opaque I argue that inequality is actually much wider than we thought or what we could calculate.
It is. But everyone has a different definition of "fair."
I am pretty sure that those 10-15% are more than enough to have a functioning government that is able to serve the public pretty well.
I’m not suggesting to eat the rich. Far from it. I’m suggesting to leave the hard working rich alone, and tax them at the end of life. Their children are no more deserving of their riches than anyone else.
For public stocks we can at least calculate value with computers, but for some that is a minority of value. In 1960 the DOW was used because it is only 30 stocks so you can add the values up every few minutes - the S&P 500 could only be calculated at the end of the day as by the time you got the value of the last stock the value of the first had changed.
the regulatory capture on display in the USA is absolutely pathetic hahaha
Not everyone is a greedy narcissist only out for themselves!
They could could have blown it on building a pyramid to house their corpse.
The government is not entitled to the assets.
That seems like a sizable contribution for a single person in a country of 330 million.
So if you're so gung-ho positive we can make a dent in the debt, then why not make sensible comments about making changes so the tax is not so easily avoidable instead of nonsensical fat people comments
https://i.ibb.co/ZXF6S9C/usa.jpg
Do I understand your position correctly?
Giving government money doesn’t really change the way government operates. The government has the budget for the year and that’s the spending for the year. If government needs something done, an item gets budgeted, money is borrowed, and paid out to get stuff done. Giving money to the government only offsets the debt; nothing else changes from that besides the number in the spreadsheet.
Imagine a world where you had 15 billionaires and 5 people working. How much are are. Those billions worth when they are fighting each other to have one of the 5 useful people wipe their ass in their care home?
This only holds when supply of work is high and demand is low. If the amount of work requested in the future is higher than the supply then it doesn’t matter how many pieces of paper you have to prove that you worked in the past, you are not going to get that work done.
With a shrinking population you’re relying of productivity gains, and in areas that old people need, like personal care, there’s only limited gains to be had. If there’s only 100 hours of ass wiping being done but 200 hours demanded, then half of the people requiring that service will be disapointed.
But that’s just the general problem of timeshifting your work. You rely on the next generation to honour “the deal”.
Now the 401k specifically has other issues. It tends to be “pile money in the S&P”, which simply increases the values of those stocks regardless of their fundamental worth. Passive investments lead to bubbles and collapse.
https://www.ft.com/content/994bdda8-b704-4e4c-9b19-4e0021f0b...
Throw both of those together and you end up with a disaster waiting to happen.
So to me, it would be very hard to make an argument that it trickles up. It has to come from investment. And investment in the private sector is usually done by rich people, because you need money in the first place to invest and also because investing well makes you rich.
Also considering that the super-rich in developing nations are not that far behind the super-rich in developed nations, why hasn't their wealth trickled down and uplifted those developing nations? The reality is that developing nations have even higher wealth inequality, so refuting your argument.
I am from a developing country. There aren't a lot of super rich here. In fact there isn't much wealth at all. Having some greater gini coefficient doesn't mean you have more wealth, inequality really isn't a relevant measure.
If raising wages was the only component to development, Somalia could simply set their minimum wage to $50 an hour and watch the country soar. Wages follow development, not the other around.