How to Hide a Billion Dollars: Three Techniques the Ultrarich Use to Dodge Ex-Sp
forbes.com
forbes.com
Bring it all out into the sunlight. Then figure out what policy should be.
I am not a fan of either particularly (well of course we want to tax people and spend it to create a better society, it's just that sentence is basically all politics ever, not a specific policy to enact)
I prefer the idea that a billionaire is a market failure. It's not like there are no millionaires looking up and going, well that guy deserves his wealth and I am just going to accept my lot in life"
If we see a billionaire in a given industry - let's ask "what regulations will they really really hate to see removed or created?"
We had tons of innovation in the past (even more important things than today) when people didn't earn bazillions from them...
You mean like these people? "40 of America's wealthiest people"
Hardly any of that was funded by billionaires...
Not at all -- the market is working exactly as intended (as long as it's not coming from externalities, like pollution that's not being paid for).
What's failing isn't the market, but taxation. We should be celebrating billionaires because they've succeeded in delivering better, cheaper products than other people. But we should also be taxing them at 90+% by that point.
Again -- it's not market failure. It's taxation failure.
When it comes to crazy wealth, most of it comes from externalities - from environmental to paying workers poorly.
I'm not saying that's what you're saying, but a lot of people tend to treat the market as intrinsically morally correct. As in, if something is the outcome of the market working correctly, then that thing is the "correct" outcome.
So, if billionaires appear as a result of the market doing its thing, then billionaries are morally entitled to their money.
I'm not sure I buy that argument.
The market has nothing to do with morality. It's simply a question of efficiency: are people as a whole better off, utility wise? But as long as everyone is making voluntary, non-coerced trades (labor for $, $ for products), then by definition they are better off. There's no moral aspect to it, just economic efficiency/"progress".
But that doesn't mean you get to keep everything you make. The market is a tool, not an end. If you kept everything, there'd be no taxation, no government, no education, nothing else, and it would be a moral disaster. The moral element comes into play with taxation: because you (as a billionaire) benefit extraordinarily from the country's systems put into place -- contract enforcement, courts, roads, education of your workers, everything -- you are morally obligated to pay your "fair share" of that back.
The only people who claim people are entitled to 100% of the money they make are a subset of libertarians/anarchists. It's not a very popular opinion, since it makes society pretty much unworkable.
Add "correctly informed" and "able to understand the consequences" to that list.
Examples:
1. Financial consultants propose to invest in high interest securities, "trust me they are safe", people invest and lose the money.
2. People lost years of life and tons of money commuting, then suddenly discovered that they can work from home. Many businesses benefitted from that, they are in trouble now. This at least was a common belief, shared by almost everybody. Most of us were wrong though.
Billionaires have by and large demonstrated the ability to take resources with millions of dollars and transform them into resources worth billions of dollars. That is evidence that they should have disproportionate power. They're obviously competent at creating wealth if given power.
They compare favourably to their closest competitors in the social arena, politicians. When dealing with big name politicians they are doing well if they don't cause excess deaths in their tenures, don't accidental destroy the economy and they generally siphon wealth and opportunity to unimpressive insiders.
There might be an equilibrium that is better, but there are a lot of equilibriums that are worse. If an Amazon-like entity is going to exist at all it makes sense for someone like Bezos to be running it. There are literally billions of people out there who would do a worse job than him. He does deserve some acknowledgement and support.
Many (most?) billionaire's wealth is tied up in the stock of companies they own. Presumably they should be required to sell their stock to give money to the government. What group of people do you expect to have the hundreds of billions, if not trillions, of dollars necessary to buy stock from company founders over the first decade?
If I'm being honest that sounds like a great way to force American owned companies to sell control of their companies to foreign individuals and institutions.
This would help with the inequality problem of ~10% of the richest Americans owning 90% of all stock.
You could even have a baby bonds program where isn’t of cash sitting in a trust there’s an ETF with a bunch of stock from taxed billionaires.
> This would help with the inequality problem of ~10% of the richest Americans owning 90% of all stock.
Reducing the value of stock is certainly one way to reduce inequality. Of course that doesn’t _actually_ help anybody. Inequality is mostly, although not entirely, a second-order metric.
So none of your concerns over who would have the money, or whether foreigners would gain ownership, would have any relevance.
But since you seem interested in wealth taxes, for people who advocate that instead, the strategy there is very different -- generally something like ~2% per year (2% yearly would add up to 70% after 60 years), which for public companies presents zero problem since the stock market is constantly purchasing shares anyways. And just like many companies have non-voting shares, selling those would prevent dilution of control.
People love to quote US income tax rates of the past. But tax revenue to GDP has been almost perfectly flat since WW2. Despite huge fluctuations in personal income tax rates. https://en.wikipedia.org/wiki/Hauser%27s_law
The whole point of taxing billionaires 90% is so we can tax the lower class close to 0%, or even spend more on them than we collect (through education, social services, health care, etc.). It's totally fine if the overall tax revenue to GDP remains unchanged. The point isn't necessarily to raise more money, it's to address inequality by creating a level playing field for each new generation of citizens.
And yes, taxation pretty much necessarily distorts spending. But loopholes are not actually that hard to fix, if we want to fix them. If we tax income and inheritance, and close taxation loopholes around things like setting up trusts/charities, then that billionaire's wealth is going to end up being collected one way or another.
The parent paid their income taxes on the money already. I believe in his death he owes capital gains on his stock holdings. So all the money that’s passed down has been taxed fairly already.
Kind of terrifying that success is made evil. What would be the consequences? Well you wouldn’t have tesla or spacex. As far as I see a self made billionaire is much more capable spending money then the government. In my opinion that is the main point.
Nearly all success in the world involves no billionaire. SpaceX’s achievements are at least partially the credit of Elon, and it is a possibility that his billionaire status was necessary for getting SpaceX off the ground, but a massive government loan was also involved.
Also, man went to the moon 60 years ago with no billionaire involved. A massive success.
1. All the space race era research NASA published openly with no strings.
2. US Gov as SpaceX's anchor customer.
I mean Elon is currently going after 16 billion in government grants related to this stuff. His success story IS LITERALLY THE OPPOSITE of this "government sucks entrepreneurs rule" nonsense cheerleading.
Would Elon not be billionaire I would bet both companies would have never existed.
There was gonna be an explosion in EVs based on the trajectory of lion pricing alone. Making an aspirational/braggart product is a fairly straightforward strategy to tap into that moving top to bottom.
SpaceX is competing with a deliberately created government monopoly. Those fat margins would have attracted someone sooner or later. What mattered was the willingness to push through the legal challenge to get a seat at the table.
A lot of innovation comes from someone precisely because they have no money. Sure funding helps do a lot of research, but necessity is the mother of all invention.
Ideally, if the new crop of leaders have any balls, they would make a prominent example of some asshole (Bosarge seems to fit that profile) just to send a message to everyone else. This was one mistake Obama did, when he went easy on all the Wall St idiots responsible for the GFC.
I’d be interested to check if any prominent Democrats that are more in Biden’s lane have actually come out and said that Obama errors in bailing out the rich during the GFC.
I’d guess no.
Money facilitates exchange. Adam Smith argues this has primacy: "The sole use of money is to circulate consumable goods." Wealth of Nations.
Other authors argue for characteristics. William Stanley Jevons properties aren't bulletproof in my view, but are a good departure point: utility and value, portability, indestructability, homogeneity, divisibility, stability of value, and cognisability.
Not saying this is the best solution but again different form of “currency / money.”
Imagine you are a human who is part of a hive mind, (think Deus Ex Helios AI) you wouldn’t have a need for money.
From bakery to supermarket to food delivery, pretty much all of the people I interact with daily are paid badly.
You could tax everything at the lowest rate at the point of sale but make people do the accounting and pay their real rate if they are in a higher rate. The "tax" at the point of sale would act like income withholdings do now.
You could categorize good so that yatchs have a much higher rate than groceries.
You could also come up with an average price for good so that really expensive e.g. clothes and cars are taxed at a higher rate than they are for "normal" goods.
All it takes is some creativity.
My point is that this will be a very large amount of effort for people, and there will be a large amount of tax evasion due to both laziness and greed.
It took me a while to understand consumption taxes, but now I'm fully in favor of them. The level of your standard of living is solely determined by what you spend money on, not your total wealth. Plus taxing consumption would be much easier and harder to skirt than a wealth tax.
It's actually just as easy, if not more. E.g. you don't "buy" a car, your trust/company buys it, and you just happen to use it for "business purposes". Same for all your other needs. And good luck trying to tax spending abroad...
A 10,000,000/year consumption by a billionaire is an insignificant part of their wealth and their annual revenue, but still allows for an extravagant lifestyle.
A 40,000/year consumption by a working class person make barely allow them to make end meet, and it might be everything they made in that year (and they might even owe a lot as well).
So, taxing 20% on consumption, would net 2M on the billionaire (a laughable amount for them) and 8K for the working class person (which could be a matter of life or death for them, some health treatment, their kids going to college, etc.)
a million seconds is about a 11.5 days. a billion seconds is about 32 years. a few million dollars to a billionaire is next to nothing.
Any tax can be made more progressive in implementation (high deductions, tiered rates, etc). Impact on poor vs wealthy shouldn't be a consideration when deciding what we want to tax.
Since much of this consumption is conspicuous, it's even possible that high levels of taxation could even be geffen-like:
Yes, we both have lear jets but I'm so rich and spend so much that mine cost _twice_ what yours did.
We need a tax system overhaul but I’m afraid no one has the political will to do it before stagflation creeps in from the current fed policies and bankrupts is all anyway.
From the practical perspective, if one has the same lifetime earnings as another, they will have paid the same amount of tax over their lifetime. Why should they be taxed again for choosing to save or invest that money?
I'm all for taxing any gain once it's actually converted into income (and while I understand the motivation behind different capital gains rates, I'm not super opposed to taxing capital gains as income.) Taxing wealth always seems to me to be explicitly taxing the choice to invest in the future or build something, though.
Taxing income disincentivizes circulation of money within community. When A does some work for B, B does some work for C, C does some work for D, and each of them pays a fraction of the income to the govenment, after a few steps the money effectively disappears from the community. The only way to get it back is to do some work for someone outside the community. But maybe the people A, B, C, D are effective at helping each other locally, but not really competitive at providing work outside the community. With no income tax, they could trade with each other. With income tax, their choices are either gray market or poverty.
Wealth tax hurts the startups. Income tax hurts the local communities. Land tax hurts the rent seekers. The rent seekers and startups have greater lobbying power than poor communities, and our laws reflect that.
- Incredibly lucky.
- Benefitting by an initial position of advantage. Most often family or nation of origin, though gender, race, or religion also. "Winning the birth lottery".
- Benefiting by externalities.
- Exploiting monopoly advantage.
- (Frequently) Lobbying for advantage.
- (Frequently) Engaging in illegal activities.
- (Frequently) Engaging in unethical or exploitive activities.
There are numerous super-competitive hard workers who are not billionaires. Some were unlucky, some born in the wrong place or time, some burdened by consscience or ethics, some crushed by existing monopolies or entrenched interests.
You conveniently skipped over the part where the comment you're responding to said "family or nation of origin". If anything, more billionaires in 3rd world countries got their wealth through corruption and family connections. Take the top billionaires in Africa:
1. Aliko Dangote: see "Family and Personal Life" on his Wikipedia page, which includes "He is the great-grandson of Alhaji Alhassan Dantata, the richest West African at the time of his death in 1955."
2. Nassef Onsi Sawiris: His Wikipedia entry starts with "is an Egyptian billionaire businessman, the youngest of Onsi Sawiris' three sons". Onsi Sawiris was a billionaire.
3. Mike Adenuga is more self-made, but even then, "his mother, Omoba Juliana Oyindamola Adenuga, was a businesswoman of royal Ijebu descent."
There are other more notorious examples from that list of billionaires, like Isabel dos Santos.
I'm interested to see how you re-evaluate your argument "when put against facts".
It's weird, you're arguing against a point that no one else is making. Of course there are many billionaires whose individual intelligence, innate gifts, hard work and diligence were crucial to them earning their fortune. Just as obviously as there are many billionaires who earned their fortune through family, connections, graft, etc. (It's also pretty easily arguable the majority of the wealthy earned their money this way, given that for every "self-made" rich person there are usually loads more family members/connections who inherit or benefit from that wealth).
But the larger point is that nobody makes their fortune in a vacuum - even all these "self-made" rich relied upon the structures of their society to enable their wealth accumulation, so it seems more than morally fair that that society has a claim to some of that wealth so the next generation can reap the same benefits. Just look at all the Internet billionaires, or billionaires who rely on GPS. Both the Internet and GPS were created by the government, and it seems fair to me that the government take a chunk of the wealth enabled by the enormous investments into those systems.
Africa with a population of 1,216 millions has ... about 20 as you state (my tally from Wikipedia is 18, but I'll take the higher number).
By billions of population, that works out to 1,160/billion North America, and 16.4/billion for Africa.
It would seems odds might somewhat favour one born (or living in) North America. By a factor of roughly 70.
One might similarly compare Germany and India, with roughly similar counts of billionaires at 107 and 102, respectively, though slighly differing populations: 83 millions vs. 1.3 billions. The rate per billion works out to 1,289/billion for Germany and 75/billion for India, differing by a factor of 17.
https://en.wikipedia.org/wiki/List_of_countries_by_number_of...
https://en.wikipedia.org/wiki/List_of_continents_by_populati...
Or is it just hard work?
The assertion to which I ras responding, and disputing, was your statement: "The people who are billionaires are billionaires because they are super competitive and super hard workers."
https://news.ycombinator.com/item?id=24395252
You are now asserting a markedly different, and I would suggest inconsistent, position.
Not that I disagree with your sentiment. Just, there are non-trivial problems w.r.t. taxing wealth, as opposed to taxing income (which is probably already being paid in fungible, liquid, dollar bills).
Firstly, there are 2 types of capital gains. Short term gains are just taxed as normal income and long term gains are taxed from 0,15,20% depending on your bracket.
The whole purpose of lower taxes for longer gains is to incentivize longer term investments, encouraging people to stay in the market longer since any "lesser gains" could be offset by the lower taxes, and also fostering a much healthier type of growth as opposed to a quarterly focus.
If anything, I think short term gains should be taxed more. I think the current environment is quite unhealthy, with lots of speculation and people just getting a quick buck selling options on Tesla week to week.
On the other hand, the health industry (from drugs to hospitals) makes a shittoan of money, and most of it is by pushing BS on people and (in the US) by overcharging 10x simple procedures...
Could you give some examples? Real personal income has been rising pretty steadily for as long as the data has been collected [1]. So the median person earns more as the years go on, not less.
The predominant determinant of labor compensation is substitutability.
Which proves the article right: the guy labored hard to move the proceeds of his partners work into a forest of trusts that only he knows and that only benefits him personally, by statute. He can't be substituted anymore!
It is becoming clearer by the day that the job market is not an efficient market at all. Why keep pretending ?
Furthermore, if you think about how insurance risk pooling works, it's quite easy to see how an insurance-backed, profit-motivated healthcare system may not be the best vehicle to address a systemic health problem afflicting the entire population. You may recall AIG as a rough analogue for this situation. Or even entities insuring against natural disasters in California. The government has to step in to prevent failure.
And then we have the most obvious counterargument to your flawed thesis: why would labor compensation go up during a recession with high unemployment and considerable attendant macroeconomic instability? Those factors have contributed to dramatically increased substitutability and thus quite naturally suppress wage growth.
Yes, that is higher than I would have expected, but I do think it's unfairly low because personally I wouldn't do a nurses job for three times that, plus you need a degree to be an RN.
You're asking the wrong person for their opinion though - my job has very little stress and I earn more that that. I do have to endure quite a few minor annoyances however, but nothing like I imagine a nurse does.
For the record, I think a lot of jobs are artificially underpaid.
The best trick corporations ever did was to promote the illusion of such a thing as unskilled labor.
Yes, average cost of living in California is about the highest in the US, although there is large variation within different parts of the state. A comparison point might be that the average teacher in California is paid about $82,000/year: https://blogs.edweek.org/teachers/teaching_now/2019/04/which.... My impression from the overall range of numbers for the different states is that nurses are paid a considerably above average salary for a a difficult job.
> You're asking the wrong person for their opinion
Outside opinions are good --- I don't think there is a clear answer here. As an American, I was somewhat surprised by how high the nurse salaries are compared to other essential professions like teaching. I also agree that they seem very low compared to many tech professions. The question then is whether one should view the tech professions as overpaid or the nurses/teachers as underpaid. The easy answer is that under capitalism, paying for a more expensive programmer can help you make even more money; while paying more for a nurse or teacher doesn't necessarily improve your profit.
It claims that in 2019 the average salaries for RN's in the US varied from just under $60K/year in South Dakota and Mississippi to over $100K/year in Hawaii and California.
EMTs average $11/hr. Paramedics $17/hr. Paramedics, in particular, who are trained to autonomously administer near 60 drugs, to intubate people, in some cases start central lines (which even most nurses cannot do).
What neurosurgeons do is amazing, and life-changing for the people they help. However, only an extremely small proportion of the population will ever receive treatment from a neurosurgeon. So, I'd argue that the net benefit of a neurosurgeon to society is relatively small compared to say Neurophysiologists (ie similar speciality, but not a doctor) and General Practitioners (ie doctor, but not the speciality), who both treat a far larger percentage of the population, and both get paid much less.
What makes you so sure? At some level of wealth, it is essentially zero effort to engage in these shenanigans; you just hire someone to do it for you. The more money you have, the higher the return on this investment. At some point it becomes deeply irrational not to do it.
Bezos and Musk think they’re saving the human race by deploying their capitol towards the pursuit of life in space.
Gates is attempting to make various diseases extinct.
Soros is attempting to bring about a world more closely aligned to the philosophical ideals that shaped his early education.
The richest of the rich usually have some pet project that they think is the most important thing in the world.
If anything, it is a much more efficient way to spend some resources. Instead of filling the bellies of thousands of red tape enabling workers, or spending that much money in pharmaceutical advertising.
The whole point of having a government is to have an institution that no one would voluntarily fund, but that we all agree to fund on the condition that everyone else does it too. It's a social mechanism designed to do an end-run around the perverse outcomes of the prisoner's dilemma. But it only works if participation is mandatory. If people are allowed to opt-out, the whole thing falls apart.
If one is a pacifist, is there an argument to be made that minimizing taxes is in fact the ethical thing to do?
Do not get super clever to pay less taxes, leave those who cannot avail themselves to such methods to pay more (or the government to go further into debt), and call that morality. Don't kid us, and don't kid yourself.
Sure, if everyone did that it would have an impact, but that seems pretty improbable.
This is essentially what a nonprofit does. Then what ends up funded is what's whimsical. For example, people donate to save cute polar bears instead of saving the ugly worm that fixes the soil problems.
So really, the citizens' choice in my example would have be to designate percentages at the top level, say to DoJ, DoD, DHS, etc.
That in and of itself would put a lot of power back in the citizens' hands. Of course, I don't see this happening, but that would be transformative. And we'd see a lot of campaigning/advertising/propaganda from each Department asking for taxpayers to direct their funds to them...
But my original premise was that Congress is gridlocked and if you think they're not serving the citizens' best interests, then this is an alternative from left field.
If so, how come since the industrial revolution, the wealthiest economies have always had the most liquid and sophisticated financial markets? (With the possible exception of a few natural resource states)
Have you considered the possibility that financial liquidity is as essential for high consumer living standards as reliable electrical grids or fair court systems? Because the majority of economists would certainly say so.
Imagine someone making such a statement, without even bothering to talk to someone with actual expertise in the field of database technology. It's fine to be a layman on the topic, but it's not a good look to presume that you no more than the domain experts without even bothering to study their positions.
Second, your analogy doesn't make sense. HFT is only enabled as a byproduct of how electronic exchanges order their trades. They could just as easily bulk all orders by the second and then randomly order them to eliminate the benefit of, for example, building as close as possible to the exchange so you have a speed-of-light transit time benefit over your competitors.