Rich people don't pay much in taxes (now in CR) - ProPublica

[Dahobbs 17449]

13 minutes ago, Brew said:

We’re going in circles, but from my side there is only value if exercised. If they are never exercised, it will always be zero. I’ve seen a lot of options not get exercised because the start up never takes off, the value is never there, etc. If the stock price goes up, they always get exercised and tax is paid. Most people exercise them as soon as they are eligible, so again just tax the spread at exercise and be done with it. 

In 20+ years of dealing with people’s taxes, I’ve only seen one instance of an individual just carrying the options. I have a lady I’m working with right now that is getting ready to retire and instead of exercising the options she thought it was better to hold them. Now she’s dealing with several million in options on a company that went public and took off to the tune of a 40x return of her option price, so it definitely happens. However, she’s also about to pay more tax than she probably would have exercising them annually like she should have. I think it’s just a discussion on the vast minority of option holders at this point.

Yes, I understand that under our current tax structure, there is no recognized income for an option until it is exercised. You keep trying to make this a technical exercise about doing someone's taxes. But I'm speaking much more generally at a fundamental economic level: an option has economic value. That value is normally determined by the market for publicly traded options. For out-of-the-money options, that value is pretty nominal, but it exists. The problem you're talking about is identifying the value for non-publicly traded options. I agree that is difficult and I'm not sure how you solve it under this approach. For most startups I'd wager that the value of the option when granted is pretty nominal. It's like being granted a bunch of lottery tickets. Under the proposed system I don't there would be much of a tax hit for those sort of options. 

Again, my preferred solution is a wealth tax akin to Texas' current property tax system. You're just taxed for a small percentage of your overall wealth every year. When these sorts of options are granted, you're taxed very little on them because they don't have much value. If they become valuable because of a rise in the stock price, then you'll be taxed on that higher value for that year.  

Edited June 14, 2021 by Dahobbs

[Nice Guy Eddie 13414]

8 minutes ago, Dahobbs said:

Again, my preferred solution is a wealth tax akin to Texas' current property tax system. You're just taxed for a small percentage of your overall wealth every year. When these sorts of options are granted, you're taxed very little on them because they don't have much value. If they become valuable because of a rise in the stock price, then you'll be taxed on that higher value for that year.  

Asking people to annually quantify their wealth and then a corresponding govt program to appraise/mediate, seems like an impossible barrier to implementation. I think one reason we see the death tax is that it's easier to inventory someone's wealth at the time of their death.

I could envision a program where wealth in the stock market could be reported and subsequently taxed.

[Dahobbs 17449]

13 minutes ago, Nice Guy Eddie said:

Asking people to annually quantify their wealth and then a corresponding govt program to appraise/mediate, seems like an impossible barrier to implementation. I think one reason we see the death tax is that it's easier to inventory someone's wealth at the time of their death.

I could envision a program where wealth in the stock market could be reported and subsequently taxed.

I think you'd have to implement an option to use an estimate, sort of like you can do with deducting sales tax now. Get primary assets like real estate and bank and investment accounts included, then estimate the rest based on a series of assumptions. But give the person the option of itemize and list out assets if the estimate is too high. And, we already require other entities to issue tax forms for your assets. No reason they couldn't do so under my proposed system. The individual tax filer shouldn't have to do the leg work the vast majority of the time. In fact, it should all be done for them like how some other countries handle income tax. 

[WhatTheBuck 28716]

17 minutes ago, Nice Guy Eddie said:

Asking people to annually quantify their wealth and then a corresponding govt program to appraise/mediate, seems like an impossible barrier to implementation. I think one reason we see the death tax is that it's easier to inventory someone's wealth at the time of their death.

I could envision a program where wealth in the stock market could be reported and subsequently taxed.

Ooh, “death tax.” You’re a victim of Frank Luntz messaging. It’s an inheritance tax.

[Sawbonz 27443]

8 hours ago, slorch said:

It's only worth something when you exercise it and the price has increased

Its worth something right then otherwise no one would accept it as compensation 

[Nivek 16863]

It should be a capital gains asset tax when assets exceed $25 million, and the annual tax rate is 3.5% of the total value.   It would wipe out some of the investing gains, but it cashing out exposes them to the income tax as well.   Personal loans under <3% interest should also be counted as income and taxed at that rate.  

   

[Nice Guy Eddie 13414]

46 minutes ago, WhatTheBuck said:

Ooh, “death tax.” You’re a victim of Frank Luntz messaging. It’s an inheritance tax.

haha. For some reason, the phrase, estate tax was escaping me so I went with death. It's not really an inheritance tax.

[sheeeit 129]

On 6/11/2021 at 6:23 PM, Neonmoon said:

On 6/11/2021 at 8:56 PM, JimmyJames said:

Subsequent posters told the story far better than I would have.

I do civil litigation for a living. So I’m paid to evaluate the worth of a particular case. In fact how much i make depends on that.

If I represent a black plaintiff, I inherently know based on experience that the verdict in his/her favor is likely to be a lot less than if they were white, and the chances of losing are even greater. Depends on the venue of course but that’s true 95 percent of the time. Kind of like representing a gay guy in midland or ector county.  That’s reality. Deny it if you want. 

Blacks are more likely to be killed by police

https://www.nhregister.com/news/article/Yale-Black-people-disproportionately-15682869.php

less likely to be approved for loans

https://www.forbes.com/sites/ginaheeb/2021/04/15/businesses-owned-by-blacks-latinos-less-than-half-as-likely-to-be-approved-for-loans-than-whites-fed-says/?sh=3edd71e353da
 

Earn less than whites 

https://www.pewresearch.org/fact-tank/2016/07/01/racial-gender-wage-gaps-persist-in-u-s-despite-some-progress/

Votes suppressed 

https://www.nytimes.com/2021/03/25/us/politics/georgia-black-voters.html

 

On 6/12/2021 at 4:50 PM, Nivek said:

Other than that? /sarcasm

 

On 6/11/2021 at 9:21 PM, Brew said:

There are plenty, it may look different today than it did 50 years ago but it is still there. There is no point in arguing that side as it’s a loser from the start.

 

Finally had a minute to cycle back to this.  Maybe you guys didn't read what I said but I am comparing poor whites and poor blacks and advantages that exist in 2021.  It may be counter intuitive to many here but the actual data suggest otherwise.  I will start with Neon's points:

1) Blacks more likely to get killed by police.  As a general statement that is an absolute fact.  However, we are talking about poor whites and blacks.  The actual statistical data show that poor whites are more likely to be killed by police than poor blacks.  It is a very similar ratio but for poor whites it is actually a bit higher.  3.3/100,000 for poor blacks and 3.6/100,000 for poor whites.  https://replicationindex.com/2019/09/27/poverty-explain-racial-biases-in-police-shootings/

2) Less likely to be approved for loans.  First, your link is about business loans.  It is nearly impossible to draw any conclusions from the report provided as there are so many differentiating factors involved in business loans.  

For personal loans and home loans in 2021, it is actually not required to provide your race and it is illegal for the lending institutions to require it.  There is exactly no data that exists that show that black people with relatively identical income levels, debt to asset ratios, debt to earnings ratios and the same piece of property being purchased have any less approval rates than white people.  Zero evidence of this.  

And if we go back to business loans, there exist hundreds of special grants and loan options (predominantly through the SBA) that are available only to black people.  There exist ZERO similar programs for poor white people.

3) Earn less than whites.  Again, the data is pretty clear on this in 2021.  There is a very small (admittedly less than the standard error margin) difference in 2021 for same job salaries between white and black.  The latest data show that black men earn $.98 for each $1.00 earned by white men in the same jobs (almost the entirety of this small gap is accounted for in the age of the workers as blacks are typically younger in these jobs than whites due to the hurdles that have existed historically) .  The study authors admit that the gap could really be zero at this point and they admit that if a gap actually exists it is closing every year.  If things continue as is, the gap will be completely non-existent (it really is non existent now) by the time a person born today enters the workforce.  https://www.payscale.com/data/racial-wage-gap

4) Voter suppression (i could not access your link but I will assume what it says generally).  Like the above, the actual data do not support that things like voter ID, polling places etc have any affect on voter turnout or vote casting.  And the reality is that when you look at things like polling locations, it is actually very much bigger problem for poor white communities than poor black communities.  https://www.vox.com/identities/2017/3/15/14909764/study-voter-id-racism

Again, I am not at all saying things have been very different in the past as they most certainly were, but I stand firmly that when analyzing the actual data and not emotion, it is probably harder for a poor white kid to get ahead in 2021 than a poor black one.  And every example you provided above showed that to be true.

 

[Guest]

52 minutes ago, Sawbonz said:

Its worth something right then otherwise no one would accept it as compensation 

False.   From my earlier example, if I am granted $25 options and I spend $25 to buy/ exercise  them, it is a net $0.

The second part of that transaction is If the price of said stock has increased and I sell those stocks, the proceeds are already taxed.

If you still believe they have value as issued, then quantify it.

[Dahobbs 17449]

12 minutes ago, slorch said:

False.   From my earlier example, if I am granted $25 options and I spend $25 to buy/ exercise  them, it is a net $0.

The second part of that transaction is If the price of said stock has increased and I sell those stocks, the proceeds are already taxed.

If you still believe they have value as issued, then quantify it.

How are you not getting this? You can purchase an out of money call option right now. It has a price. It has a value. Do you think a lottery ticket has no value despite the fact the people actually pay for them?  

Edited June 14, 2021 by Dahobbs

[workswithseed 2037]

Just now, Dahobbs said:

How are you not getting this, you can purchase an out of option call right now. It has a price. It has a value. 

Seems more like a sales tax. When you first buy something like a house where the it could devalue or increase in value. The first purchase of it would get taxed on the selling of it to the buyer.

[hornmpa96 2598]

Calling Mr. Black and Mr. Scholes to the White courtesy phones to explain Options Valuation

[Guest]

1 hour ago, Nivek said:

It should be a capital gains asset tax when assets exceed $25 million, and the annual tax rate is 3.5% of the total value.   It would wipe out some of the investing gains, but it cashing out exposes them to the income tax as well.   Personal loans under <3% interest should also be counted as income and taxed at that rate.  

   

 Why the fuck would a loan be taxed as income? You're paying back with money already taxed.

 

Some of you want it all.   LOLz.   

Edited June 14, 2021 by slorch

[Nice Guy Eddie 13414]

1 hour ago, slorch said:

 Why the fuck would a loan be taxed as income? You're paying back with money already taxed.

 

Some of you want it all.   LOLz.   

some people live off loans and use their assets as collateral. If you have enough in assets, its a method to avoid capital gains and/or income taxes for an extremely long time. 

[Brew 3049]

35 minutes ago, Nice Guy Eddie said:

some people live off loans and use their assets as collateral. If you have enough in assets, its a method to avoid capital gains and/or income taxes for an extremely long time. 

Another one of these topics in this discussion I have never seen in practice. Short-term needs, sure. Business funding needs, sure. Just for living that is held for a long-time to avoid capital gains, not once. More commonly I see loans against C Corps now that those rates have flipped with individuals to keep the income in the Corp and taxed there, but it is taxed. Parents to kids, see that one all the time but not sure how that would be an income scenario. I think we’re chasing boogeymen that just don’t really exist in practice outside of limited cases. There are 100’s of loopholes that should be debated and fixed and more have been created in the last few years than ever before.

[TexasEd 8064]

39 minutes ago, Brew said:

Another one of these topics in this discussion I have never seen in practice. Short-term needs, sure. Business funding needs, sure. Just for living that is held for a long-time to avoid capital gains, not once. More commonly I see loans against C Corps now that those rates have flipped with individuals to keep the income in the Corp and taxed there, but it is taxed. Parents to kids, see that one all the time but not sure how that would be an income scenario. I think we’re chasing boogeymen that just don’t really exist in practice outside of limited cases. There are 100’s of loopholes that should be debated and fixed and more have been created in the last few years than ever before.

kinda kidding tho

Edited June 14, 2021 by TexasEd

[Brew 3049]

13 minutes ago, TexasEd said:

kinda kidding tho

Valid example, people tap home equity all the time for things. However, I would consider that outside of the loan types they are talking about. It may not be though.

[Dahobbs 17449]

58 minutes ago, Brew said:

Another one of these topics in this discussion I have never seen in practice. Short-term needs, sure. Business funding needs, sure. Just for living that is held for a long-time to avoid capital gains, not once. More commonly I see loans against C Corps now that those rates have flipped with individuals to keep the income in the Corp and taxed there, but it is taxed. Parents to kids, see that one all the time but not sure how that would be an income scenario. I think we’re chasing boogeymen that just don’t really exist in practice outside of limited cases. There are 100’s of loopholes that should be debated and fixed and more have been created in the last few years than ever before.

It happens. As I said, it is commonly pitched to and used by successful attorneys. I don't have personal knowledge of its use outside that group, but it is most definitely used within it.

[Brew 3049]

4 minutes ago, Dahobbs said:

It happens. As I said, it is commonly pitched to and used by successful attorneys. I don't have personal knowledge of its use outside that group, but it is most definitely used within it.

I’ve asked before, explain the concept for me in detail. In years of practice and years of sitting in tax planning discussions with people as high up as Big 4 partners, it’s never come up. I get the concept of taking loans against assets, I don’t get the concept of this in long-term planning to avoid capital gains when they are at historical lows.

[Guest]

1 hour ago, Nice Guy Eddie said:

some people live off loans and use their assets as collateral. If you have enough in assets, its a method to avoid capital gains and/or income taxes for an extremely long time. 

Gotdam fuckers cheating society out of their god-given rights to assets...

[JimmyJames 12271]

10 minutes ago, Brew said:

I’ve asked before, explain the concept for me in detail. In years of practice and years of sitting in tax planning discussions with people as high up as Big 4 partners, it’s never come up. I get the concept of taking loans against assets, I don’t get the concept of this in long-term planning to avoid capital gains when they are at historical lows.

Ask warren Buffett and similar crew of thousands you’ve never heard of and all their accountants how they do it.
 

As much as big 4 partners make, it’s peanuts compared to the owners of the capital of this country and those big 4 partner guys are probably mainly getting taxed on their labor anyway. Just because they make a shitload of money doesn’t mean it’s not labor. Sounds like you maybe do accounting for the top 2-15 percent. He’s talking about the ultra rich.

[Brew 3049]

Who do you think does the tax work for the top 2 percent, typically the Big 4. I brought over the southeast regional managing tax partner for one of the top 6 firms as a partner 3-4 years ago, that discussion isn’t something that has come up. I have a number of clients that are well into the 9 figures, none in the 3 comma club so you are probably right about that. Which is also the reason I asked for an explanation rather than conjecture and what I’ve heards.

Also a number of Big 4 partners don’t make that much, typically the regionals outpace them in comp and they make up for it in retirement benefits.

Edited June 14, 2021 by Brew

[fattyflattie 4636]

13 minutes ago, JimmyJames said:

Sounds like you maybe do accounting for the top 2-15 percent. He’s talking about the ultra rich.

The 10% is at something around 165k salary.  Pretty sure people that drag 165k don’t have a tax guy. 
 

*I’m speaking income, I re-read your post and assume you are speaking wealth.  So nvm there’s obv a big difference there. 

Edited June 14, 2021 by fattyflattie

[JimmyJames 12271]

Just now, fattyflattie said:

The 10% is at something around 165k salary.  Pretty sure people that drag 165k don’t have a tax guy. 

Small business owners do though. Or at least they should.

[sheeeit 129]

24 minutes ago, JimmyJames said:

Ask warren Buffett and similar crew of thousands you’ve never heard of and all their accountants how they do it.
 

As much as big 4 partners make, it’s peanuts compared to the owners of the capital of this country and those big 4 partner guys are probably mainly getting taxed on their labor anyway. Just because they make a shitload of money doesn’t mean it’s not labor. Sounds like you maybe do accounting for the top 2-15 percent. He’s talking about the ultra rich.

I have to agree with Brew here.  This is just a made up vehicle.  Warren Buffet would laugh his ass off if someone suggested he take out a line of credit against his assets for his day to day living expenses so he could avoid capital gains tax on potentially selling some stuff.

At the very best, you are just delaying taxation and not avoiding it.  

And contrary to what some here have suggested (that you can get a line at an interest rate that is guaranteed to be lower than the rate of return of your assets) there are no sure things.  At some point all of those loans have to be paid back.  

For short term capital needs or some specific project or something then sure an LOC can make sense.  But as a way to fund your lifestyle to avoid taxation is just a horrible financial decision.

[JimmyJames 12271]

1 minute ago, sheeeit said:

I have to agree with Brew here.  This is just a made up vehicle.  Warren Buffet would laugh his ass off if someone suggested he take out a line of credit against his assets for his day to day living expenses so he could avoid capital gains tax on potentially selling some stuff.

At the very best, you are just delaying taxation and not avoiding it.  

And contrary to what some here have suggested (that you can get a line at an interest rate that is guaranteed to be lower than the rate of return of your assets) there are no sure things.  At some point all of those loans have to be paid back.  

For short term capital needs or some specific project or something then sure an LOC can make sense.  But as a way to fund your lifestyle to avoid taxation is just a horrible financial decision.

Not if you die before it’s taxed and then you and your family avoid the estate tax because the republicans made that incredibly easy to do. 

Not sure why an accountant is asking a bunch of non accountants to explain something to him that appears to be fairly common knowledge in the accounting world. Should be the other way around but whatever.

[Guest]

2 hours ago, Nice Guy Eddie said:

some people live off loans and use their assets as collateral. If you have enough in assets, its a method to avoid capital gains and/or income taxes for an extremely long time. 

Loans cost money.  They are not income.

[Dahobbs 17449]

1 hour ago, Brew said:

I’ve asked before, explain the concept for me in detail. In years of practice and years of sitting in tax planning discussions with people as high up as Big 4 partners, it’s never come up. I get the concept of taking loans against assets, I don’t get the concept of this in long-term planning to avoid capital gains when they are at historical lows.

If you hold sufficient funds in the investment side of certain banks, you can get a non-secured line of credit for something like 70% of the value of the investment account with below prime rates. You can use this to avoid taking a tax hit on capital gains and instead live with the small interest charge. The bank doesn't really care about the interest because it makes fees on the investment side. And the interest is well below the average rate of return on the investment side, so the assets grow faster than the loan. The primary risk is that a downturn in the market forces what is essence a margin call. The interest on the loans is then deducted when income is recognized. 

In addition, there is a larger, shadier pitch on how to avoid taxes on the original income. I think that is less common, but I don't know all the details except to say that it has been pitched to a number of people I know. 

Edited June 15, 2021 by Dahobbs

[Dahobbs 17449]

24 minutes ago, slorch said:

Loans cost money.  They are not income.

That's the point. 

[sheeeit 129]

21 minutes ago, JimmyJames said:

Not if you die before it’s taxed and then you and your family avoid the estate tax because the republicans made that incredibly easy to do. 

Not sure why an accountant is asking a bunch of non accountants to explain something to him that appears to be fairly common knowledge in the accounting world. Should be the other way around but whatever.

Huh?  Makes no sense.  Are you suggesting that the LOCs dont have to be paid back at some point if someone dies?  Are you suggesting that if someone dies and then the heirs sell assets to pay off the loans that they are not taxed on the sale?

The reality is that the only time you really see this type of set up, using large lines against assets, is purely for liquidity issues for the owner due to SEC regulations on large stock divestitures from insiders.  If Elon Musk wants to buy the Dodgers or a huge luxury yacht then using a personal LOC against his stock holdings is going to be 1000x easier than selling the stocks to purchase the team or yacht.  It has nothing to do with tax avoidance.  He, like many in his world, also like to gamble.  They think the stocks in their companies will go up and they want to profit from that.  They also know if they start divesting stock that the market may sense some weakness and the price of the stock can be hurt for no other reason than him selling large chunks.  In fact, him borrowing against his stock sends a strong signal to the market that he believes in his companies long term.  

Lastly, why do you or anyone else care?  It is much, much better for the economy for the uber wealthy to take out loans and get that money into the economy versus paying taxes on it.  

I get the argument for some kind of wealth tax and there is probably a fit there in some capacity but this argument that using personal loans is some how gaming the system is just stupid.  You take away that option and the uber wealthy will just buy less stuff and the economy suffers.

 

[Brew 3049]

4 hours ago, Dahobbs said:

If you hold sufficient funds in the investment side of certain banks, you can get a non-secured line of credit for something like 70% of the value of the investment account with below prime rates. You can use this to avoid taking a tax hit on capital gains and instead live with the small interest charge. The bank doesn't really care about the interest because it makes fees on the investment side. And the interest is well below the average rate of return on the investment side, so the assets grow faster than the loan. The primary risk is that a downturn in the market forces what is essence a margin call. The interest on the loans is then deducted when income is recognized. 

In addition, there is a larger, shadier pitch on how to avoid taxes on the original income. I think that is less common, but I don't know all the details except to say that it has been pitched to a number of people I know. 

I 100% get that scenario for large purchases, other investments, whatever. They are using leverage against an asset they own to invest in something else. I have zero problem with that scenario no different than taking a second out on your house to build a pool. You own the asset and use it accordingly. 

My read on this discussion has been they were leveraging options/other assets for more lifestyle related things, current expenses, etc. because the valuation increase is greater than the interest expense. Maybe that’s still the play, I just don’t see it. If I have $1B in that investment bank and borrow $50M to fuck around with this year, I still have to create taxable income somewhere to pay it back unless we are just running a stacking deal until I die. If I borrow $50M next year to fuck around with, now I’m into the bank for $100M and even at 1% I now owe them $101.5M at the end of year 2. If I die, the kids or the trusts owe the money back but they got $1.17B (assuming 8% growth) in stepped up basis without paying CG’s and end the day $60M or so ahead not getting into estate tax issues. Spread that out over some longer period and they are just betting on stock valuations to outpace interest I guess. However, I just don‘t see this example anywhere near as prevalent as my first example. You are talking a handful of people with the kind of unrealized appreciation where that works in end of life stages where it makes sense. Shit, most of those people still have plenty of cash where again it is a scenario 1 deal on large scale investment opportunities.

Maybe everyone is doing it, but short of reviewing their financial statements it’s a still just a bunch of hypotheticals. I’m not sure it’s a reason to argue for the wealth tax as the real reason is unrealized appreciation of the investments not what they are doing with that equity. Back on that one, how are we valuing closely held entities under this new wealth tax provision?

Edited June 15, 2021 by Brew

[Brew 3049]

4 hours ago, JimmyJames said:

Not if you die before it’s taxed and then you and your family avoid the estate tax because the republicans made that incredibly easy to do. 

Not sure why an accountant is asking a bunch of non accountants to explain something to him that appears to be fairly common knowledge in the accounting world. Should be the other way around but whatever.

It’s such a fucking beating being involved in a discussion with you over anything, so I’ll bow out of further ones at this point.

[LABEVO 928]

 

[LABEVO 928]

 

[Nice Guy Eddie 13414]

52 minutes ago, LABEVO said:

 

Interesting opinion that America depends on people willing to work for low wages. Or some high wage people depend on it for their wealth. I know several people that earn extremely nice salaries and bonuses working for a company that works other employees to death for $10-12 per hour. And I get the idea that you’ve paid your dues so therefore you get to be rewarded on the labor of those paying their dues right now.

[Bama Llama 1447]

Replace the present loophole-ridden tax code cheese with a national sales tax, with a high enough threshhold to prevent regressive harm.  Yawanna buy high dollar vehicles and swag? Step right up.

Too simple?

 

 

[Dahobbs 17449]

7 hours ago, Brew said:

I 100% get that scenario for large purchases, other investments, whatever. They are using leverage against an asset they own to invest in something else. I have zero problem with that scenario no different than taking a second out on your house to build a pool. You own the asset and use it accordingly. 

My read on this discussion has been they were leveraging options/other assets for more lifestyle related things, current expenses, etc. because the valuation increase is greater than the interest expense. Maybe that’s still the play, I just don’t see it. If I have $1B in that investment bank and borrow $50M to fuck around with this year, I still have to create taxable income somewhere to pay it back unless we are just running a stacking deal until I die. If I borrow $50M next year to fuck around with, now I’m into the bank for $100M and even at 1% I now owe them $101.5M at the end of year 2. If I die, the kids or the trusts owe the money back but they got $1.17B (assuming 8% growth) in stepped up basis without paying CG’s and end the day $60M or so ahead not getting into estate tax issues. Spread that out over some longer period and they are just betting on stock valuations to outpace interest I guess. However, I just don‘t see this example anywhere near as prevalent as my first example. You are talking a handful of people with the kind of unrealized appreciation where that works in end of life stages where it makes sense. Shit, most of those people still have plenty of cash where again it is a scenario 1 deal on large scale investment opportunities.

Maybe everyone is doing it, but short of reviewing their financial statements it’s a still just a bunch of hypotheticals. I’m not sure it’s a reason to argue for the wealth tax as the real reason is unrealized appreciation of the investments not what they are doing with that equity. Back on that one, how are we valuing closely held entities under this new wealth tax provision?

(1) this was just one simple example of a strategy used to avoid or delay paying taxes. I wasn't attempting to explain every stratagem available. My primary point is that stragies like this require signicant assets (you don't get these rates even if secured  by your 700k house), which is an advantage that those with extreme wealth have over the lower classes. 

(2) Yes, in general this particular strategy bets on assets increasing in valuation faster than interest increases. I though I had been fairly explicit about that. The interest is minimal, so it's a pretty safe bet and still better than taking a large tax hit. 

(3) as I said previously, once you start taxing unrealized appreciated, you essentially have a type of wealth tax anyway even if you're calling it an income tax. 

[Guest]

2 hours ago, LABEVO said:

 

Our entry level jobs start at $51k.  Yes they are hiring in Tennessee.

Can't have a felony though...

[Brew 3049]

2 hours ago, LABEVO said:

 

I’m curious about how they pulled their data. I just looked through the first 20 where I live and none of them had a posted salary. Their website links with ziprecruiter and it pulls an expected salary range for your area with most having a low estimate of the $20k range but the high estimate was generally 1.5x-3x that for a pretty useless range.

[Brew 3049]

36 minutes ago, Dahobbs said:

(1) this was just one simple example of a strategy used to avoid or delay paying taxes. I wasn't attempting to explain every stratagem available. My primary point is that stragies like this require signicant assets (you don't get these rates even if secured  by your 700k house), which is an advantage that those with extreme wealth have over the lower classes. 

(2) Yes, in general this particular strategy bets on assets increasing in valuation faster than interest increases. I though I had been fairly explicit about that. The interest is minimal, so it's a pretty safe bet and still better than taking a large tax hit. 

(3) as I said previously, once you start taxing unrealized appreciated, you essentially have a type of wealth tax anyway even if you're calling it an income tax. 

I still think you’re using such a small percentage of what’s happening out there as your justification, that it makes no sense. However, moving past that because it really doesn’t matter.

You still can’t call it an income tax, it’s a wealth tax pure and simple or a tax in unrealized gains if you are only going after specific asset classes. It doesn’t meet the definition of income which has been part of this discussion the whole time. I assume you are taxing unrealized appreciation on properties, private holdings, etc. as well so it’s a true wealth tax and you’re not just picking on unrealized appreciation in investment accounts? If it’s everything, then I assume that also includes personal residences over the tax threshold, rental properties, etc. with everyone getting to participate?

[TwiceHorn 31302]

On the topic of "loans," I saw something posted on one of these threads, one of the older ones, about how those with massive untaxed gains, I think usually in stock held in an ownership (majority-type) position obtain loans against the stock that have dubious repayment plans.

And, if there's a dubious repayment plan, the interest rate becomes irrelevant.

These were clearly ways of realizing gain on appreciated assets without either liquidating the asset or incurring taxation. I'm not exactly sure what the "angle" was, but the intention was pretty clear.

[Dahobbs 17449]

3 minutes ago, Brew said:

I still think you’re using such a small percentage of what’s happening out there as your justification, that it makes no sense. However, moving past that because it really doesn’t matter.

You still can’t call it an income tax, it’s a wealth tax pure and simple or a tax in unrealized gains if you are only going after specific asset classes. It doesn’t meet the definition of income which has been part of this discussion the whole time. I assume you are taxing unrealized appreciation on properties, private holdings, etc. as well so it’s a true wealth tax and you’re not just picking on unrealized appreciation in investment accounts? If it’s everything, then I assume that also includes personal residences over the tax threshold, rental properties, etc. with everyone getting to participate?

My justification is that I think income taxes are inherently regressive, as we have discussed. I don't have any issue with people using these tax strategies given our income tax system. I just think the system itself is poor. My ultimate goal is create a system where there is more pressure to avoid excessive accumulation of wealth such that a small percentage of the population owns the vast majority of the resources. I think that is an economically inefficient result. 

Yes, I know my proposal is not a income tax. That has been my point. You and others have said: "why drop the income tax when all you really have to do is tax unrealized gains?" 

My answer has been I don't have a problem with that because it isn't really an income tax anymore, but actually a wealth tax (what I want). 

To answer you last question, yes, my personal preference would be a low percentage tax on all owned assets. I personally would not choose a tax system that only taxes gains. Rather, I would simplify by taxing at maybe 1-2% of the total value of all assets every year. I'd probably add some thresholds or exemptions to avoid burdening the working poor. 

 

[DalTxHornFan 3085]

Speaking selfishly as somebody that does economics and valuation for a living, I say bring on the wealth tax!  It will be commonly known as the "Lawyer and Accountant Full Employment Act."

[workswithseed 2037]

1 hour ago, DalTxHornFan said:

Speaking selfishly as somebody that does economics and valuation for a living, I say bring on the wealth tax!  It will be commonly known as the "Lawyer and Accountant Full Employment Act."

We should do the Window tax like GB did. Only the rich will be taxed. The Poor's will never see natural light in their homes again, but it's going to help them in the long run.

[Dahobbs 17449]

1 hour ago, DalTxHornFan said:

Speaking selfishly as somebody that does economics and valuation for a living, I say bring on the wealth tax!  It will be commonly known as the "Lawyer and Accountant Full Employment Act."

It is unlike the current system that definitely doesn't employ a ton of lawyers and accountants. 

[Hugo Stiglitz 23362]

 

[fattyflattie 4636]

7 hours ago, Brew said:

I’m curious about how they pulled their data. I just looked through the first 20 where I live and none of them had a posted salary. Their website links with ziprecruiter and it pulls an expected salary range for your area with most having a low estimate of the $20k range but the high estimate was generally 1.5x-3x that for a pretty useless range.

Maybe because it’s, I dunno...bullshit?

[JimmyJames 12271]

17 hours ago, Brew said:

It’s such a fucking beating being involved in a discussion with you over anything, so I’ll bow out of further ones at this point.

Well since I wasn’t talking to you maybe you should have either ignored it then or made a substantive response instead of just bashing me instead. Hope it made you feel temporarily better.

[JimmyJames 12271]

21 hours ago, sheeeit said:

Huh?  Makes no sense.  Are you suggesting that the LOCs dont have to be paid back at some point if someone dies?  Are you suggesting that if someone dies and then the heirs sell assets to pay off the loans that they are not taxed on the sale?

The reality is that the only time you really see this type of set up, using large lines against assets, is purely for liquidity issues for the owner due to SEC regulations on large stock divestitures from insiders.  If Elon Musk wants to buy the Dodgers or a huge luxury yacht then using a personal LOC against his stock holdings is going to be 1000x easier than selling the stocks to purchase the team or yacht.  It has nothing to do with tax avoidance.  He, like many in his world, also like to gamble.  They think the stocks in their companies will go up and they want to profit from that.  They also know if they start divesting stock that the market may sense some weakness and the price of the stock can be hurt for no other reason than him selling large chunks.  In fact, him borrowing against his stock sends a strong signal to the market that he believes in his companies long term.  

Lastly, why do you or anyone else care?  It is much, much better for the economy for the uber wealthy to take out loans and get that money into the economy versus paying taxes on it.  

I get the argument for some kind of wealth tax and there is probably a fit there in some capacity but this argument that using personal loans is some how gaming the system is just stupid.  You take away that option and the uber wealthy will just buy less stuff and the economy suffers.

 

So trickle down actually works. Got it.

[workswithseed 2037]

3 hours ago, Hugo Stiglitz said:

 

We should tax the rich!

Yeah!

Now let's bail them out!

Wait? What?